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1 Dividend Superstar I’D buy over TD Bank Stock

Canada Day fireworks over two Adirondack chairs on the wooden dock in Ontario, Canada
Source: Getty Images

Written by Demetris Afxentiou at The Motley Fool Canada

Canada’s big banks are almost always among the best long-term options for investors to consider. There are plenty of reasons for that view. The banks offer some growth potential, juicy dividends, and a stable revenue stream. Recently TD Bank (TSX:TD) has pulled back over its peers, leading some to consider alternatives over buying TD Bank stock.

While there’s reason to believe TD Bank stock will recover, there are some other alternative options to consider right now that can pay handsomely. One such option for investors to look at is Enbridge (TSX:ENB).

To be clear, I do like TD Bank

Let me start with the obvious disclaimer. I do believe that TD Bank is a great stock to own. I also believe that the stock will make a remarkable recovery over the longer term and return to a period of growth.

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That being said, the bank’s issues run deeper than the current bout of high interest rates and inflation.

The concerns, which led to the bank shedding 13% year to date, originate from ongoing investigations by U.S. regulators over TD not properly reporting suspicious transactions. That’s already led to the bank being slapped with a fine, and findings from the investigation could lead to additional fines in the future.

As a result, TD now trades within a dollar of its 52-week low as of the time of writing.

But here’s the thing – TD will recover. The big banks are well-known for setting aside funds for loss provisions, or in this case, possible fines. And TD has weathered all sorts of pullbacks in its 160-plus years of history.

In other words, TD bank stock should be viewed as a long-term investment by those who already hold the stock.

But those who haven’t bought TD Bank stock yet, may want to opt for Enbridge.

The case for Enbridge

While TD continues to tread water waiting for the disposition of its current issues, let’s turn our attention to Enbridge.

Most investors are familiar with Enbridge, but few realize just how diversified the energy infrastructure giant really is.

Enbridge is best known for its pipeline network. There’s a good reason for that; the pipeline network comprises the largest and most complex pipeline system on the planet. That network includes both natural gas and crude elements, hauling massive amounts of both each day.

Specifically, Enbridge hauls nearly one-fifth of the natural gas needs of the U.S. market and one-third of all North American-produced crude. That sheer volume makes Enbridge one of the most defensive options on the market.

Enbridge also owns a growing renewable energy portfolio that it has invested nearly $10 billion in over the past two decades. Today, that segment includes approximately 40 facilities located in Europe and North America.

Additionally, Enbridge operates the largest natural gas utility in North America. This provides yet another defensive source of revenue for the company.

Prospective investors should note that the utility business and Enbridge’s renewable facilities generate a reliable revenue stream backed by long-term regulated contracts. That reliable revenue stream allows Enbridge to invest in growth and pay a handsome dividend.

As of the time of writing, that dividend works out to an insane 7.6%, making it one of the best-paying options on the market. And that’s not all! Enbridge has provided investors with solid annual bumps to that juicy yield that goes back three decades.

In other words, Enbridge can provide a reliable, growing dividend while also investing in long-term growth.

Why you need to choose Enbridge over TD Bank stock

Apart from its insane dividend, Enbridge offers investors a more diversified option over TD Bank stock. Additionally, Enbridge can offer considerable growth potential, across both its renewable and gas utility businesses.

In my opinion, Enbridge is a stellar long-term option for investors to consider and should be part of any well-diversified portfolio.

The post 1 Dividend Superstar I’D buy over TD Bank Stock appeared first on The Motley Fool Canada.

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Fool contributor Demetris Afxentiou has positions in Enbridge and Toronto-Dominion Bank. The Motley Fool recommends Enbridge. The Motley Fool has a disclosure policy.

2024