After a historic rally for the TSX Index, investors might be wondering what the best dividend stock is to capitalize on now as valuations inch higher and momentum investors look to chase the market to even higher highs. Indeed, Enbridge (TSX: ENB), BCE (TSX: BCE), and Telus (TSX: T) are three higher-yielding Canadian names that may be appealing to passive income investors at this juncture. And while the sizes of the yields, growth profiles, and industry challenges may differ, I do find each one of the names to be more than worth adding to a watchlist.
At today’s multiples, though, let’s explore the trio of income plays to determine which offers the most bang for one’s investment dollar. So, whether you’re looking for a new addition to your TFSA, RRSP, or a non-registered account (don’t forget about the Canadian dividend tax credit!), consider the following:
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Enbridge
First, let’s start with the best-performing stock in this trio. Enbridge stock went from laggard to leader, and if you weren’t patient with the name, you might have missed the two-year rally to new highs just shy of the $70 mark. Indeed, the pipeline stocks are in again, and while the easiest gains are in the books, with shares of ENB rising close to 50% in two years, I still find the value proposition (24.4 times trailing price-to-earnings (P/E)) and 5.5% dividend yield as worthy of an investment at these fresh highs. Is there risk of a near-term pullback?
Most definitely. But given the 0.87 beta, I don’t think a U.S. tech-led market pullback will be all too impactful on shares over the near term. In any case, I find Enbridge to be a utility-like cash cow that’s well positioned to keep giving back via generous annual dividend raises. Sure, the golden opportunity to buy is no longer, but that doesn’t mean the bull run is ready to roll over. I think the $151 billion midstream energy titan still has legs to climb all the way to $100 over the longer term.
Telus
Telus stock has a magnificent 7.6% dividend yield, and it’s safer than you think. After a modest dividend hike delivered several months ago, new investors don’t have to worry too much about the telecom following in the footsteps of BCE, which previously slashed its payout. While there are notable pressures, it’s nothing that Telus can’t overcome. The company is looking to get in on the AI boom, as it looks to revamp its growth profile after a past year of operational efficiency-driving efforts.
In short, the dividend looks safe and the stock looks like a bargain for those willing to hang on for at least four years. For those who want big passive income, T stock is my top pick right now.
BCE
BCE (TSX: BCE) saddened many investors when it reduced its dividend a while back. But the good news is it’s well-equipped to grow its payout at an above-average rate as the business heads on the road to recovery. Today, shares yield a very respectable 5.4% yield.
Of course, there are numerous headwinds and competitive challenges that could eat away at earnings growth over the medium term. However, I think the stock is oversold and undervalued enough to start thinking about acting on a contrarian case. At 11.8 times forward P/E, shares look deeply discounted and unfairly punished. While I still prefer Telus stock, I’m also not against nibbling on a few shares today as they look to bottom out.
