Enbridge (TSX:ENB) isn’t just a great dividend (growth) play to stash away in a TFSA (Tax-Free Savings Account), it’s a wonderful company with what I’ve described as one of the most shareholder-friendly management teams out there. Indeed, the firm is a real cash cow, and while I’d not hesitate to top up a position at these heights, I just think there’s better value elsewhere now that shares of ENB go for more than 23 times trailing price-to-earnings (P/E). Indeed, the pipelines are back in fashion on Bay Street.
And while the perfect combo of momentum and dividend growth makes it worth staying aboard the pipeline giant, I must say that it’s a bit discouraging to see the yield shrink to 5.6% from more than 7% in just a few quarters. Indeed, if only we could go back and lock in the 7% yield alongside the dividend growth and swift double-digit percentage point gains to come.
While I’ve been pounding the table on ENB stock for years now, I must say I’m more inclined to hold off while the name is at fresh all-time highs just north of $66 per share. Though Enbridge is likely to keep operating at a very high level as the midstream energy scene experiences tailwinds, I think there’s more yield and deeper value to be had in the telecom arena.
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BCE stock looks dirt-cheap; its fortunes may be turning
Take those battered shares of BCE (TSX:BCE), which suffered a colossal dividend cut many months ago. The yield sits at a still-respectable 4.9%, and with many investors paring the name from their portfolio, I think there’s an opportunity to get in while the bears are in control. At writing, BCE stock is still down over 51% from its all-time high.
And while there’s pressure on the telecoms amid rising pricing pressure, sky-high competition, and all the sort, I must say that the bear thesis is already more than baked into the stock. At $35 per share, the telecom titan looks like a firm with so little in the way of expectation that even a hint of relief could be enough to fuel a significant upside move. During the firm’s second quarter, BCE posted decent revenue and net earnings numbers. It was a light beat, but enough to allow BCE stock to move into the green for a change.
With 94,000 new mobile customer additions (more than 56% above estimates), BCE seems to be getting back on the right track.
The telecom juggernaut isn’t just getting off the canvas; it’s starting to show it has what it takes to outpace its rivals in the Big Three in wireless, and perhaps it offers more bang for the buck at these depths. Personally, I don’t think the much-better-than-feared Q2 is a one-off. BCE has made many moves behind the scenes, and the firm may very well be on the cusp of a sustained turnaround despite an apparent lack of industry catalysts in the second half.
Too cheap to ignore
Sure, a single percentage point in growth isn’t all too exciting. But it’s a starting point, perhaps for something big as BCE eyes AI (Perplexity Pro is a worthy perk for customers), as a way to sweeten the business after a stale past couple of years.
At 13.3 times forward price-to-earnings (P/E), I view BCE stock as an absolute rock-bottom steal at these depths. If Q2 is a turning point, perhaps some serious dividend growth could be looming as the firm looks to win back income lovers in the years following its big dividend reduction.
