2 Dividend Stocks I’d Buy Over Enbridge

Enbridge (TSX:ENB) stock remains a fantastic long-term bet for investors seeking a dividend and slightly less correlation to the rest of the market (0.82 beta). And while I’ve been a big fan of the stock for a while, I must say that the shares aren’t super cheap anymore.

Arguably, they’re fairly valued at around 26.4 times trailing price to earnings (P/E). In any case, I’ve seen shares of ENB at lower prices. And nothing against the 5.6%-yielding dividend, but the yield has been at more elevated levels in the past. Come the next wave of headwinds and continued annual dividend hikes, I’d say there’s a decent chance that a yield of more than 6% will be possible again in the future, perhaps the near future if the latest correction in ENB stock is the start of something more painful.

In any case, Enbridge is a great hold if you need income. However, for everyone else, I think there are cheaper dividend stocks out there worth picking up as the year comes to a close. In this piece, we’ll look at two income stocks I’d rather buy over the nearly $150 billion midstream energy kingpin.

Leon’s Furniture

Leon’s Furniture (TSX:LNF) is a mid-cap furnishing retailer ($2 billion market cap) that has a highly underrated dividend, currently yielding 3.33% at the time of this writing. After gaining a decent, though market-trailing 12%, on a year-to-date basis, I also see potential to make up for lost time, as consumer spending on big-ticket home furnishings and appliances looks to increase. Undoubtedly, Leon’s seems to be in that perfect middle zone for those who value quality and a good price.

Though the economy faces challenges in the new year, I think that Leon’s will be there once the tides are ready to move higher. Perhaps further rate cuts could boost the economy as the “wealth effect” from a soaring TSX Index has Canadian consumers feeling better about splurging on that new couch, along with a side table and even new kitchen appliances.

Given Leon’s wide moat surrounding Canada’s furnishing space, I view LNF stock as deeply undervalued at 11.3 times trailing P/E. With robust cash flows, I also see the dividend growing with time. As the company looks to pursue a major real estate investment trust spinoff, I see the potential to unlock serious shareholder value.

All considered, Leon’s has a lot going for it. And shares are in the bargain bin right now.

Canadian Tire

Canadian Tire (TSX:CTC.A) is another discretionary retail that might be heavily discounted going into December. The stock yields a very nice 4.3% right now. And while it’s far less than that of Enbridge’s, I can’t help but pound the table over the catalysts ahead and the really low earnings bar in place.

The stock trades at 11.9 times trailing P/E, making it one of the deeper value bets in Canadian retail right now. The business itself is doing quite well, especially following a good quarterly showing that saw good margins and sales growth.

The firm behind the Canadian Tire flagship store, Sport Chek, and Mark’s could be a major gainer should rate cuts lead to higher consumer spending in 2026. With the True North strategy already paying dividends, I’d prefer the $9 billion retail icon over most other dividend payers right here, especially those looking for wider margins of safety.

The post 2 Dividend Stocks I’d Buy Over Enbridge appeared first on The Motley Fool Canada.

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More reading

• TFSA: A Beginner’s Guide to Creating a Passive Income Portfolio
• TFSA Income: 2 Premier Canadian Dividend Stocks to Buy Right Now With $10,000
• 2 TSX Giants to Buy for Years of Growth and Dividends
• 3 High-Yield Dividend Stocks That Are Screaming Buys Right Now
• 3 High-Yield Dividend Stocks That Are Compelling Buys Right Now

Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge and Leon’s Furniture. The Motley Fool has a disclosure policy.