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A Dividend Giant I’d Buy Over Enbridge Stock


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Image source: Getty Images.

Enbridge (TSX:ENB) stock has been one of the more active Canadian dividend heavyweights in recent weeks. The stock is in the process of recovering from a multi-month decline that brought it as low as $43 and change per share. Indeed, the main draw to the $98.5 billion pipeline company has to be the dividend yield, which remains quite swollen at 7.68%.

Undoubtedly, another pullback toward multi-year lows could bring the yield back above the 8% mark. However, if such a dip never ends up materializing, passive-income investors glued to the sidelines may stand to miss out on the already generous 7.68% yield.

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Sure, you can get a pretty good rate without taking any risk (hello, 5.5%-rate Guaranteed Investment Certificates!), but as rate hikes pause and cuts become a part of the conversation as soon as next year, it’s dividend heavyweights like Enbridge that may become a hot commodity again through the eyes of income investors.

Enbridge stock is a great dividend heavyweight, but it’s not the only one in town!

Further, Enbridge is a company that’s demonstrated it’s willing to pursue many alternatives to keep a dividend going strong. Even in the face of headwinds, I’d be willing to bet a dividend hike is far likelier than a dividend cut. The managers over at the pipeline kingpin are just too generous to shareholders!

Though I’m not against averaging into a full position in Enbridge over time, I think there are more intriguing, and perhaps less-choppy stocks to consider at this juncture. Indeed, you need a strong stomach to hang onto those shares of Enbridge, which have experienced no shortage of bumps in the road over the years.

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So, what’s the TSX stock I’d pick over Enbridge right here? Enter fellow pipeline company TC Energy (TSX:TRP), which oftentimes falls in the shadows of the much larger Enbridge. At writing, TC Energy boasts a $52.5 billion market cap. Still sizeable, but almost half the size of Enbridge’s. While TC Energy faces similar industry headwinds, I view shares as a slightly better deal, even though the dividend yield is a tad smaller at 7.37% (less than Enbridge’s 7.68% at the time of writing).

What’s so appealing about TC Energy stock?

The company has been in asset sale mode of late. Such asset stake sales will raise enough funds to reduce the leverage on the firm’s balance sheet. If a recession is in store for 2024, I’m simply a bigger fan of strong balance sheets. Though Enbridge’s balance sheet is somewhat decent, I must say I’m a bigger fan of TC Energy’s at this juncture. The way I see it, it’s far better to be prepared for the worst as you hope for the best!

Not to take away from Enbridge. The company could prove wise for pursuing opportunities in a less-than-stellar environment. Ultimately, I think investors may wish to own shares of ENB and TRP together.

The Foolish bottom line

TC Energy is a magnificent pipeline stock in its own regard. Though Enbridge stock gets most of the love, I think investors looking to bargain hunt in the midstream energy space have to buy both at these depths!


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