A Dividend Giant I’d Buy Over BCE Stock Right Now

There are laws of physics like gravity and thermodynamics, and I like to think there are laws of investing, too. One of the most reliable ones is simple: if a dividend is not well covered by free cash flow, it will eventually be cut.

Investors often look at dividend payout ratios based on earnings, but that approach breaks down for capital-intensive businesses. In sectors like telecom, accounting earnings are heavily distorted by depreciation, while it’s the cash flow that actually pays dividends.

A good example is BCE (TSX:BCE). Earlier this year, I flagged its unusually high payout ratio based on distributable cash flow and suggested management would likely cut the payout outright, which ended up happening. We’re now seeing similar warning signs at TELUS, which has paused dividend increases as analysts question how sustainable the payout really is, given rising debt costs.

The headwinds are structural. Slower population growth limits subscriber expansion, pricing power is capped by regulation and competition, and heavy debt loads mean a growing share of cash flow goes toward interest payments instead of shareholders.

If you want a dividend stock in the critical infrastructure space that prioritizes sustainability rather than stretching the balance sheet, there’s one clear alternative I’d choose instead: Enbridge (TSX:ENB).

What Is Enbridge?

Enbridge is one of the most important pieces of energy infrastructure in North America. The company operates crude oil and liquids pipelines, natural gas transmission networks, gas distribution utilities, and renewable energy assets. Its pipeline system alone moves roughly 30% of the crude oil produced in North America, making it a true toll-booth business.

What sets Enbridge apart is how it gets paid. Most of its assets operate under long-term contracts, often 20 years or more, with volume commitments and inflation-linked escalators. That means Enbridge is largely insulated from short-term commodity price swings. Whether oil is $60 or $90, the pipes still earn a fee for moving molecules from point A to point B.

This contract structure creates highly predictable cash flow, which gives management confidence to invest, borrow at reasonable rates, and return capital to shareholders. It’s the exact opposite of the telecom model, where pricing pressure, capital intensity, and leverage are all working against dividend safety.

Why Enbridge’s dividend looks safer

Enbridge’s management team is very explicit about dividend discipline. The company targets a dividend payout ratio of 60% to 70% of distributable cash flow. That range leaves room for reinvestment, debt reduction, and unexpected shocks.

Compare that to BCE, which was paying out more than 100% of distributable cash flow before its cut. That gap had to be filled with borrowing, which is never sustainable in a higher-rate environment.

The results speak for themselves. Enbridge has paid dividends for over 70 years and increased its dividend for roughly 30 consecutive years. Over the past three decades, the dividend has grown at an annualized rate of about 9%, comfortably ahead of inflation.

What’s next for Enbridge?

Management guidance gives investors a clear roadmap. Looking ahead, Enbridge expects adjusted EBITDA to grow at roughly 8% annually, with distributable cash flow per share growing around 3%. That supports ongoing dividend increases in the low single digits.

Right now, Enbridge pays a quarterly dividend of $0.9425 per share. The most recent record date was November 14, with payment on December 1, so new investors will need to wait for the next cycle. Based on the current share price as of December 18, the dividend translates into an annualized yield of roughly 6%.

That yield is well covered, backed by contracted cash flows, and supported by a business model that doesn’t rely on aggressive subscriber growth or financial engineering. In a market where several high-profile dividend stocks have stumbled, that consistency matters.

If your goal is reliable income rather than chasing yield at any cost, I personally think Enbridge offers a much stronger foundation than Canada’s troubled telecom stocks.

The post A Dividend Giant I’d Buy Over BCE Stock Right Now appeared first on The Motley Fool Canada.

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More reading

• 5 Dividend Stocks to Double Up on Right Now
• 1 No-Brainer Energy Stock to Buy With $750 Right Now
• These Are Some of the Top Dividend Stocks for Canadians in 2026
• There’s Carney. There’s Trump. And These TSX Stocks Could Benefit.
• TFSA: 2 Discounted Dividend Stocks to Buy for Passive Income

Fool contributor Tony Dong has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge and TELUS. The Motley Fool has a disclosure policy.