Enbridge Is Great, But I Think This Stock Could Be a Better Buy

Enbridge may be the safer dividend giant, but BCE’s beaten-down shares could offer the bigger rebound if its turnaround works.

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published July 27, 5:00 pm EDT

| More on: BCEENB

Key Points

Enbridge has huge, hard-to-replicate energy assets and steady cash flow, but the stock looks less cheap after a long run.
BCE cut its dividend, yet still yields around 5% and now has more cash to pay down debt and invest.
BCE is riskier, but even a modest recovery could deliver more upside than Enbridge from here.

Enbridge (TSX:ENB) has become so reliable that the market finally noticed, and that creates an awkward problem. The better the stock performs, the less of a bargain it becomes.

That certainly doesn’t make Enbridge stock a bad investment. Its pipelines, utilities, and renewable-power assets generate the kind of predictable cash flow dividend investors dream about. Yet with the stock now trading near $80 after an enormous multi-year run, I think BCE (TSX:BCE) could offer more upside for investors willing to stomach a messier turnaround.

Person holding a smartphone with a stock chart on screen — Source: Getty Images

Enbridge remains a dividend giant

Enbridge stock transports approximately 30% of the oil produced in North America and about 20% of the natural gas consumed in the United States. It also serves roughly 7.1 million utility customers, giving the company a collection of assets that would be almost impossible to replicate.

Those assets helped Enbridge generate $5.8 billion in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) during the first quarter. Distributable cash flow increased by $74 million, and management reaffirmed its 2026 guidance, calling for between $5.70 and $6.10 in distributable cash flow per share.

Enbridge also expanded its secured project backlog to approximately $40 billion. That pipeline of future projects supports management’s target of roughly 5% annual growth in adjusted EBITDA, distributable cash flow per share, and earnings per share after 2026.

Add in a $3.88 annual dividend yielding nearly 5%, and it’s easy to see why Enbridge stock remains a dependable dividend stock. The problem isn’t the business. It’s the price investors now need to pay for that dependability.

BCE reckoning

BCE stock, meanwhile, is sitting on the opposite side of the popularity contest. Its shares remain roughly half their previous peak after slow growth, heavy debt, intense telecom competition, and a dividend cut that shattered its reputation as a forever-income stock.

That cut was painful, but it also lowered the annual dividend from $3.99 to $1.75 per share. The new payout still yields approximately 5.8% at a share price near $30, while giving BCE more cash to reduce debt and invest in fibre, cybersecurity, and artificial intelligence (AI) infrastructure.

The early results aren’t exactly fireworks, but they’re moving in the right direction. First-quarter revenue rose 4% year over year to $6.2 billion, while adjusted EBITDA increased 2.9% to $2.6 billion. Free cash flow edged 0.8% higher to $804 million, helping support the new, more realistic BCE dividend.

BCE also has growth opportunities that investors may be overlooking. Bell Business Markets revenue increased 9.7%, helped by 113% growth from AI-powered solutions. Internet revenue climbed approximately 15% after including Ziply Fiber, while Crave subscriptions jumped 25% to 4.7 million.

That gives BCE several potential ways to grow beyond its mature Canadian wireless business, which is exactly what the company needs to rebuild investor confidence.

Foolish takeaway

Enbridge stock is unquestionably the safer choice. Its cash flows are more predictable, its dividend record is much stronger, and investors don’t need to bet on a turnaround. BCE still carries substantial debt; adjusted earnings fell 7% in the first quarter, and higher capital spending could limit free cash flow growth.

However, the market already knows Foolish takeaway is wonderful. Its shares have more than doubled over the last five years and now trade at roughly 27 times earnings. BCE’s problems are equally obvious, but that pessimism has pushed its share price and valuation down to levels that leave far more room for a recovery

Investors prioritizing dependable income should still prefer Enbridge. Yet if I were investing new money for long-term total returns, I’d lean toward BCE. The telecom’s turnaround won’t be pretty, but investors receive a 5.6% yield while waiting, and even a modest recovery in earnings and sentiment could produce considerably more upside.