Enbridge (TSX:ENB) stock remains a fantastic long-term bet for investors seeking a dividend and slightly less correlation to the rest of the market (0.82 beta). And while I’ve been a big fan of the stock for a while, I must say that the shares aren’t super cheap anymore.
Arguably, they’re fairly valued at around 26.4 times trailing price to earnings (P/E). In any case, I’ve seen shares of ENB at lower prices. And nothing against the 5.6%-yielding dividend, but the yield has been at more elevated levels in the past. Come the next wave of headwinds and continued annual dividend hikes, I’d say there’s a decent chance that a yield of more than 6% will be possible again in the future, perhaps the near future if the latest correction in ENB stock is the start of something more painful.
In any case, Enbridge is a great hold if you need income. However, for everyone else, I think there are cheaper dividend stocks out there worth picking up as the year comes to a close. In this piece, we’ll look at two income stocks I’d rather buy over the nearly $150 billion midstream energy kingpin.
Leon’s Furniture
Leon’s Furniture (TSX:LNF) is a mid-cap furnishing retailer ($2 billion market cap) that has a highly underrated dividend, currently yielding 3.33% at the time of this writing. After gaining a decent, though market-trailing 12%, on a year-to-date basis, I also see potential to make up for lost time, as consumer spending on big-ticket home furnishings and appliances looks to increase. Undoubtedly, Leon’s seems to be in that perfect middle zone for those who value quality and a good price.
Though the economy faces challenges in the new year, I think that Leon’s will be there once the tides are ready to move higher. Perhaps further rate cuts could boost the economy as the “wealth effect” from a soaring TSX Index has Canadian consumers feeling better about splurging on that new couch, along with a side table and even new kitchen appliances.
Given Leon’s wide moat surrounding Canada’s furnishing space, I view LNF stock as deeply undervalued at 11.3 times trailing P/E. With robust cash flows, I also see the dividend growing with time. As the company looks to pursue a major real estate investment trust spinoff, I see the potential to unlock serious shareholder value.
All considered, Leon’s has a lot going for it. And shares are in the bargain bin right now.
Canadian Tire
Canadian Tire (TSX:CTC.A) is another discretionary retail that might be heavily discounted going into December. The stock yields a very nice 4.3% right now. And while it’s far less than that of Enbridge’s, I can’t help but pound the table over the catalysts ahead and the really low earnings bar in place.
The stock trades at 11.9 times trailing P/E, making it one of the deeper value bets in Canadian retail right now. The business itself is doing quite well, especially following a good quarterly showing that saw good margins and sales growth.
The firm behind the Canadian Tire flagship store, Sport Chek, and Mark’s could be a major gainer should rate cuts lead to higher consumer spending in 2026. With the True North strategy already paying dividends, I’d prefer the $9 billion retail icon over most other dividend payers right here, especially those looking for wider margins of safety.
