Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Should You Buy TD (TSX:TD) Stock or Enbridge (TSX:ENB) Stock Now?

Stock MarketsNov 25, 2021 18:45
Saved. See Saved Items.
This article has already been saved in your Saved Items
Should You Buy TD (TSX:TD) Stock or Enbridge (TSX:ENB) Stock Now?

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and Enbridge (TSX:TSX:ENB)(NYSE:ENB) are two of Canada’s top dividend stocks. Is one a better buy right now for your self-directed TFSA or RRSP portfolio?

TD TD is set to report fiscal Q4 2021 results on December 2. Investors are waiting to see if the bank will raise its dividend and announce a new share-buyback plan now that the government has given Canadian financial companies the green light to restart these activities.

Banks had to halt their dividend hikes in 2020. TD’s compound annual dividend-growth rate was better than 10% over the previous 20 years, so investors could see a 20% distribution increase to make up for the last two years. TD is sitting on extra cash it set aside to cover potential loan defaults during the pandemic. The company hasn’t been hit with the level of losses it feared when the country first went into lockdown. This is primarily due to government aid that went to businesses and homeowners. In addition, the Canadian housing market remained robust over the past two years.

Looking ahead, TD should benefit from a continued rebound in the Canadian and U.S. economies in the next few years.

Interest rates are expected to gradually increase starting in the first half of 2022. This could lead to a rise in loan defaults. There is also a threat that a sharp increase in rates over a short time period could trigger a housing downturn.

A major crash isn’t likely, but the housing market looks overheated, and higher rates could lead to a correction. On the other side of that coin, rising interest rates tend to be net positive for the banks, as they can generate better net interest margins.

TD is a very profitable company and has delivered strong total returns for buy-and-hold investors. The stock trades at a reasonable 11.3 times trailing 12-month earnings, and investors who buy today can pick up a 3.3% dividend yield and wait for the next dividend increase.

Enbridge Enbridge took a bit of a hit in 2020 when a plunge in fuel demand resulted in lower throughout along its oil pipelines. Despite the difficult environment, Enbridge still managed to deliver on its distributable cash flow (DCF) target last year and even raised the dividend for 2021 by 3%. The strength of the natural gas transmission, gas distribution, and renewable energy businesses provided steady revenues.

This year the oil pipelines are full again and Enbridge just completed the eight-year Line 3 Replacement project. The conclusion of the development means the line can run at full capacity, bringing crude oil from Alberta to refineries in the United States. Enbridge also just closed its US$3 billion acquisition of a key oil export platform and related pipeline infrastructure in Texas.

Revenue and cash flow should improve in 2022, and Enbridge will likely announce another dividend increase in early December when it provides its 2022 financial plan.

The stock is off the 2021 high and currently provides a 6.6% dividend yield.

Is TD or Enbridge a better buy today? TD and Enbridge are both leaders in their respective industries and should continue to deliver strong total returns for investors.

That said, Enbridge offers the best dividend yield and appears cheap at the current share price. TD stock has had a nice run in the past two months on the anticipation of strong fiscal Q4 results and the impending dividend increase, so it might be due for a near-term pullback. As such, I would probably make Enbridge the first choice today.

The post Should You Buy TD (TSX:TD) Stock or Enbridge (TSX:ENB) Stock Now? appeared first on The Motley Fool Canada.

The Motley Fool recommends Enbridge. Fool contributor Andrew Walker owns shares of TD Bank (TSX:TD) and Enbridge.

This Article Was First Published on The Motley Fool

Should You Buy TD (TSX:TD) Stock or Enbridge (TSX:ENB) Stock Now?

Related Articles

Is Lightspeed (TSX:LSPD) Stock Price Still a Buy?
Is Lightspeed (TSX:LSPD) Stock Price Still a Buy? By The Motley Fool - Dec 05, 2021

Lightspeed Commerce (TSX:TSX:LSPD)(NYSE:LSPD) stock has been in a downward spiral for months. Currently trading for $64, it’s down 59% from its all-time high. The...

Could This Retail Stock Become a Tech Stock?
Could This Retail Stock Become a Tech Stock? By The Motley Fool - Dec 05, 2021

The line between retail and technology has been blurring for years. Nearly everything you can buy in a store is now also available online on the store’s website. This is...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email