Though stretched dividends are on somewhat less stable footing, I still think the value proposition is worth considering. Let’s have a brief look at two high-yield dividends to determine if the dividend is safe enough to warrant punching a ticket in January 2025.
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BCE
BCE (TSX: BCE) stock’s tailspin seems to be picking up going into year’s end, with the stock crumbling to $32 and change per share to end 2024. Undoubtedly, the stock is down around 40% on the year. And while there seems to be a lack of catalysts for 2025, I still think the stock has become absurdly undervalued for longer-term investors who wouldn’t mind a dividend reduction at some point over the medium term. Indeed, it would be nice if shares of BCE were to keep the payout intact.
However, with a yield that’s now north of 12% (no, that’s not a typo!), I find it to be just a matter of time before a dividend reduction is served up. Indeed, BCE’s job of turning a corner would be made far easier if management just gave in and reduced the dividend. Some analysts have been hitting the downgrade button on the stock, calling for a dividend cut sooner rather than later.
The good news is that I think that a dividend cut is already mostly priced at less than $33 per share. And while I have no idea when BCE will bottom out, I find the name to be a high-upside comeback play should management be able to find the means to turn the tides.
For now, it’s a name only fit for dip-buyers with a high tolerance for pain. The stock is down nearly 56% from its highs, with a double-digit percentage yield that I thought the stock would have never commanded outside of a broader market-crash-esque scenario. Whether BCE stock is a steal of a deal right here, though, remains to be seen. There are tough company-specific and industry headwinds to get through. And it could take more than just a few quarters to overcome them.
Enbridge
Enbridge (TSX: ENB) is another low-cost dividend payer that may be worth checking out in the first quarter of 2025. Unlike BCE, I view the dividend as more than safe at 6.25%. Indeed, the stock is fresh off a solid year, gaining more than 25% for 2024.
In 2025, I think the pipeline top dog can add to its momentum as it looks to reach new all-time highs. With one of the best track records of resilient dividend growth in the TSX Index, I’d not sleep on the name after year-end strength.
The well-run midstream energy giant is ready to keep making smart investments, which should jolt earnings and dividend growth. Sure, a 6% or so yield isn’t massive, but, at the very least, it’s highly unlikely to be cut in the new year. That alone makes ENB stock a better bet than BCE, at least in my opinion. In terms of turnaround potential, though, perhaps BCE stock may have a lot more to offer.
