A heavily discounted dividend aristocrat like BCE is hard to ignore. The telecom giant and one of the most prominent 5G stocks in Canada has been growing its payouts for 14 consecutive years and has reigned as the largest telecom company in Canada (in multiple domains, including market capitalization) for years.
Its current 10.8% yield might seem mouth-watering, but you should keep in mind that the company plans to pause its dividend growth.
It’s not suspending or slashing its dividends for now, but there is no clear timeline for when dividend growth will resume. So, the stock is likely to lose its aristocratic status. And if its financials don’t bounce back, the dividends might become even riskier.
So, it might be smart to look into another dividend giant that offers a smaller yield but far more substantial dividends.
The energy sector leader
Since BCE is the leader in the telecom sector, it’s only proper that you replace it with another leader like Enbridge (TSX:ENB), the largest energy company in Canada and one of the largest pipeline companies in the world.
It leads the energy sector in market capitalization, currently at $130 billion, close to its all-time high. It also leads the midstream segment in North America, transporting about 20% of all the natural gas consumed in the U.S. and 30% of all the crude oil produced in the continent.
The numbers are even more impressive for Canada-U.S. exports. So, its stability is not simply limited to the nature of its midstream, specifically the pipeline business, which is already sheltered from energy price fluctuations. The sheer number of energy products it moves across the continent makes it a financially sustainable giant.
The company has also diversified its business mix to include natural gas utilities, solidifying another significant chunk of its overall revenues. This financial stability is a critical strength because it translates to its long-term dividend sustainability.
The dividends
Enbridge has been growing its payouts for a much longer time (compared to BCE) — 29 consecutive years. This makes it a Dividend Aristocrat not just in Canada but in the U.S. as well, where the requirement is far more stringent.
The company managed to grow its dividends through multiple crises, including the 2014 energy sector slump in Canada and the pandemic. The yield is also quite generous at 6.2%, though not on par with BCE.
However, considering its business model and history, the yield is far more sustainable. Another step the company has taken in this regard is adopting a conservative dividend-growth strategy.
The company is planning on growing its dividends by around 3% each year, which is expected to allow the company to keep growing its dividends for a very long time.
Foolish takeaway
From a dividends perspective, Enbridge stands out from other energy stocks in Canada. Right now, the stock is also going against the sector’s otherwise stagnant and, to an extent, even bearish trend and has grown over 26% in the last few months. This is one of the reasons to consider Enbridge right now — i.e., riding at least part of the current growth momentum.
