Shares of BCE (TSX: BCE) certainly do feel like a compelling sell, especially after the latest multi-week surge. While BCE shares are still a country mile away from their peak levels, shares are up close to 5% year to date or about 10% in the past month. Undoubtedly, the 5.2%-yielding dividend looks more than safe now that it’s been reduced and perhaps poised for above-average growth as BCE gets its wheels back on the tracks. And while the telecom-facing storm might be closer to an end, I still think that a drastic turnaround could span more than a year.
Either way, investors should stay patient and get ready to buy the dips and perhaps take a few chips off the table on those sudden bounces. With the stock well above the $34 mark, I see BCE as a potential trim candidate, especially since there are so many harder-hit dividend payers out there with more to offer on the yield front.
While there’s nothing fundamentally wrong with shares of BCE at these levels (it’s actually a dirt-cheap dividends stock at 5.1 times trailing price-to-earnings (P/E)), I think that there’s more yield out there for those willing to do some searching in the TSX Index’s bargain bin this January.
Here is one stellar income stock that might be a better bet than BCE stock for those who just have to have a yield closer to 6%.
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Enbridge
Enbridge (TSX: ENB) is a fantastic go-to for dividend investors who want the best of both worlds (dividend growth and a fat yield). While the yield used to be much larger, I still think the growth profile is pretty decent in this environment, especially as more investors look to rotate into value and relative stability plays.
While shares of ENB have been a bit choppy, the correlation to the TSX Index remains on the lower end, with the stock’s 0.82 beta. If the TSX Index is in for a decline due to some geopolitical shocker of an event, ENB stock might just hold its own better than the rest of the market. Either way, the 5.93% dividend yield is on solid ground. Up ahead, I’d look for cash flows to really start surging higher as big capital expenditures from the past few years begin to pay off. Undoubtedly, much of the cash will be redirected back to shareholders in the form of a dividend hike.
It’s a dividend-growth star, and it might just have what it takes to pick up the pace. In the next 18 months, there are earnings drivers in place to fuel what could be a robust leg higher in the stock. Add longer-term investments (think Mainline), and Enbridge seems to have the pipeline to keep the cash and dividend raises coming steadily over the long run. Perhaps it’s a name to buy and hang onto for decades.
After going flat (up just 1% in the past year) for quite a while, I see shares as getting on the cheap side. My bet is that it’ll finish 2026 with strength. As for BCE, I’m not so sure if recent momentum will last all too long.
