Enbridge (TSX: ENB) is a dividend growth superstar that I’ve been enthusiastic about for a long time. And while the pipeline giant is finally outrunning the TSX by an impressive margin, with that big dividend still intact, I’m less inclined to be as bullish on the name, primarily due to the rising valuation.
Now, shares of ENB are by no means expensive, even after soaring close to 50% in just two years. At the time of this writing, shares go for 23.7 times trailing price-to-earnings (P/E). Not obscenely expensive. But it is on the high side of the five-year historical range.
Personally, I’d rather wait for another downturn for a chance to pick up shares at below 20 times trailing P/E. While the midstream energy industry has been picking up speed, I wouldn’t say I’d be chasing it, even if the 5.6% dividend yield is tempting. In the meantime, I find these dividend payers to be far better deals.
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BCE
It’s easy to give up on BCE (TSX: BCE) now that it has lost more than half of its value from its peak. With the dividend cut (the yield now sits at 5.2%), income investors may not be all too fond of the telecom cash cow anymore, and it’s not hard to see why. While the new payout is more than safe, it’s going to take some years of dividend growth for the firm to regain the confidence of the investors who may have jumped ship since that brief 2022 peak, just shy of $74 per share.
Today, the name goes for $33 and change, and the trailing price-to-earnings (P/E) multiple, currently sitting over 72 times, doesn’t seem to suggest there’s much value here. That said, the forward P/E sits closer to 12 times. That’s not a bad price to pay for an industry champion that’s doing its best to turn the tables. Expectations have also been lowered by analysts, which may not leave much room for further downside. At the end of the day, the lower a stock goes, the lower the risk to be had by investing in the name.
While I’m not calling a bottom in BCE stock, I do think that any further weakness could make today’s great buying opportunity an even better one. With the recent launch of Bell Cyber, which will power AI cybersecurity offerings, I think it’s time to warm up to the name despite the turbulent past year.
Canadian Tire
Canadian Tire (TSX: CTC.A) stock has gotten so cheap that even insiders have been buying up the stock. At 11.6 times trailing P/E, with a 4.2% yield, you’re getting a rock-solid, growing dividend at a rock-bottom price. Of course, the retailer has felt various pressures over the past couple of years. And while it has been a fairly choppy ride, I do think that investors seeking long-term appreciation and dividend growth may wish to stick with the name.
It’s oversold and could be sitting on some nice efficiency gains, as the firm pares various corporate roles in its restructuring. As a tech-savvy retailer, I’d also look for AI operating margin gains in the coming three to five years. Sure, the firm will need to invest a great deal, but it’ll be worth it once Canada’s economy gets back on track.
As the firm readies new Hudson’s Bay-branded products later in the year, it will be interesting to see if Canadian Tire can get a bit of a sales boost. There’s a lot of potential behind the brands, and I can’t wait to see what kind of “updates and fun initiatives” will come to be by year’s end.
