BCE (TSX: BCE) stock’s incredibly swollen 8.6% dividend yield could give any long-term passive income investor a nice raise. Undoubtedly, it’s a former market darling and blue-chip dividend top dog that’s fallen upon hard times.
At writing, the stock is down more than 36% from all-time highs. Still, a bottom may not be in the books quite yet, especially as the firm looks to move through a rather turbulent industry environment, one that’s fiercely competitive and heavily weighed down by the last few years’ worth of interest rate hikes.
Now that the Bank of Canada is cutting and investors are looking forward to far lower rates in 2025 and 2026, questions linger as to whether the likely environment to come is conducive to a sustained rally for the hard-hit telecom plays. Indeed, low rates are a bit of a tailwind, but an ailing firm like BCE needs more than just lower rates to shrug off recent pressures and march back to highs not seen in more than two years.
At this juncture, I’d argue there’s just way too much uncertainty to be doubling down on BCE stock, even if the dividend, which remains relatively well-covered, survives this brutal multi-year rough patch.
Investors shouldn’t reach for the super-high yield if there’s a chance of losing a considerable sum of capital. In the case of BCE, it still has challenges ahead of it that make the name more worth a wait-and-see type of play than a deep-value bargain hiding in plain sight.
Let’s check out two dividend stocks I’d much rather reach for as November looms.
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CN Rail
At around $155 and change, CN Rail (TSX: CNR) stock boasts a 2.2% dividend yield; while not nearly as impressive as BCE’s, CN Rail has an incredible dividend-growth track record that could extend for many decades.
The stock is in a rough patch right now, off just shy of 14% from its high. After a solid quarter released on Tuesday, though, investors may have more of a reason to get behind the stalling rail play again. For the quarter, the company’s revenues were higher while profits were lower, partly due to wildfires and labour disruptions.
Indeed, it was a somewhat decent result, given the magnitude of operational hiccups. Either way, I think now is a great time to be a net buyer while the firm looks to chug ahead and move on from transitory headwinds that weighed it down in recent months. CN Rail is a dividend growth hero, and the track may be smoother than the one behind it.
Enbridge
Enbridge (TSX: ENB) stock looks as timely as ever with its still-high dividend yield (6.4%), modest multiple (22.1 times trailing price-to-earnings), and accelerating share price momentum. Over the past year, ENB shares are up over 30%. And with few signs of slowing down, I do view the pipeline behemoth as a top pick for income investors seeking solid total returns over the next three years.
Though analysts at Jefferies recently downgraded the stock to hold from buy due to less clarity on the catalysts ahead, I still think the name is a great long-term buy for those who want to get paid a huge dividend to wait for the next leg higher. Sure, a pullback could strike at any time. Regardless, I’d be ready to load up on such dips as the midstream energy giant seems to have all the right cards in place for the first time in a long time.
