Canadian Dividend Showdown: Fortis vs. Enbridge — Which Prevails?

I love pitting two great companies against each other and seeing which may be the better pick for the average investor. While I like to think I’m the average investor, the reality is that I come with my own set of personal biases and investing goals that are different than everyone else, making pick the best dividend stock out of even a grouping of two an exercise in subjectivity.

That said, there are some key differences between the two dividend juggernauts I’m going to discuss in this piece that are worth considering. Here are the pros and cons of investing in these two dividend studs right now.

Fortis

Fortis (TSX:FTS) has long been my top pick in the Canadian utility space, and that view hasn’t changed.

The regulated electricity and gas utility giant has continued to produce considerable upside gains for investors seeking capital appreciation. The chart above is really a thing of beauty and is one that’s provided plenty of buying opportunities over the years (I’ve been pounding the table on most of the company’s recent downturns as buying opportunities).

The thing is, with Fortis now trading at its current valuation of around 20 times earnings, some investors may balk at what appears to be a relatively minuscule dividend yield of around 3.7%. However, I’d point investors’ attention to the fact that Fortis has raised its distributions for more than five decades straight, each and every year.

So, for investors looking for meaningful passive income growth in retirement (or at least looking to set up a portfolio in this way), Fortis is an easy choice as a top pick right now.

Enbridge

Moving on to the energy infrastructure space, Enbridge (TSX:ENB) remains my top play for investors considering exposure to pipeline operators in this current environment.

That view is based partly on Enbridge’s sky-high dividend yield of more than 6%. While this yield is certainly enticing, it’s down considerably from where it was trading just a few months ago. Much of that has to do with Enbridge’s recent stock performance, which puts this company on par with Fortis in terms of the upside it’s provided investors over time.

I’d argue this company is more of an investment worth making for those seeking more yield today (with less of a runway to wait for a given distribution to grow into the range investors need to retire). For those looking for +5% yields, Enbridge’s balance sheet stability and quality as a premier pipeline player in North America should insulate this decision and make ENB stock an easy portfolio addition for the long term.

So, which is the better bet?

In my view, Fortis and Enbridge are really excellent picks for investors who have a long-term investing time horizon. However, I think Enbridge would be a position much better suited for those with higher income needs (and perhaps a shorter investing time frame), with Fortis remaining the better longer-term pick for younger investors.

Time in the market matters, and I think both stocks should do relatively well over the next decade. They’re fairly priced blue-chip stocks with solid balance sheets and dividend yields that will continue paying distributions for a very long time.