Enbridge (TSX:ENB) is undoubtedly one of the best dividend stocks Canada has to offer investors. Looking at the chart below, investors will note that both companies have stock charts that are up and to the right. And given the dollar values of each company’s shares, it’s interesting to look at the coincidental similarities between their stock prices over the past five years.
That said, there’s another top Canadian dividend stock I think may be an even better bet for long-term investors.
Let’s dive into why Fortis (TSX:FTS) may be the better pick of the two for those seeking both dividend growth and capital appreciation over the long term.
Dividend growth matters
I keep coming back to this key point when it comes to Fortis, especially when comparing this company to other high-quality blue-chip dividend stocks on the TSX. There are few companies that have continued to raise their dividends through thick and thin (bull and bear markets alike) in the same way as Fortis.
For more than 51 consecutive years, Fortis has raised its dividend. Enbridge’s track record isn’t too shabby either, having raised its dividend in each of the past 30 years. However, from a dividend growth standpoint, Enbridge’s 3%-ish annual hikes are a far cry from the 6-7% Fortis has been able to put up each year for most of recent history.
I’d think that this dividend growth trajectory is likely to remain robust for quite some time. Here’s why.
Better growth catalysts
As one of Canada’s largest utility providers, Fortis benefits not only from the sort of rock-solid defensive demand many investors want, but also some very strong growth catalysts.
As we see new technologies like artificial intelligence flourish, we’re going to need more power. A lot more power. The good news is that Fortis is a dominant player in its core markets and has a rock-solid balance sheet. This should mean that if there’s a deal to be made, Fortis is well-positioned to enter new markets.
As we see more investors focus on utilities stocks as the best way to play the AI revolution, I think Fortis could pick up steam moving forward. Yes, energy independence is important, and Enbridge is a top North American player in this sector. But AI is going to be here to stay, and Fortis is well-positioned to benefit from these trends for decades to come.
The verdict
Overall, Enbridge’s existing 5.8% dividend yield may be more attractive on its face than Fortis’ respective yield of 3.5%. That’s true. But it’s also true that Fortis has better growth fundamentals looking into the future, and the company’s underlying growth catalysts make it better positioned to eventually provide higher distributions to investors seeking yield.
Thus, from a total return perspective, my top dividend stock pick in the TSX continues to be Fortis. I stand by this view until something critical changes with the narrative.
