Should Enbridge Inc. or Royal Bank of Canada Be in Your TFSA?

Enbridge Inc. (TSX:ENB)(NYSE:ENB) and Royal Bank of Canada (TSX:RY)(NYSE:RY) are two of Canada’s top companies. Is one more attractive today?

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Canadians are searching for top dividend stocks to add to their TFSA portfolios.

The strategy makes sense, especially when dividends are invested in new shares to harness the power of compounding.

Let’s take a look at Enbridge Inc. (TSX:ENB)(NYSE:ENB) and Royal Bank of Canada (TSX:RY)(NYSE:RY) to see if one deserves to be in your TFSA.

Enbridge

Enbridge closed its $37 billion purchase of Spectra Energy this year in a deal that created North America’s largest energy infrastructure company.

The move wasn’t a surprise, given the consolidation momentum in the sector and the growing resistance to big pipeline projects.

Spectra brought important gas assets to complement Enbridge’s strong liquids pipeline operations. It also provided a nice boost to the near-term capital plan, which currently stands at close to $31 billion.

As the new assets are completed and go into service, Enbridge expects to see cash flow improve enough to support annual dividend growth of at least 10% through 2024.

The existing dividend provides a yield of 4.9%, so investors are looking at some solid returns in the medium term.

Royal Bank

Royal Bank generated close to $2.8 billion in profits for fiscal Q3 2017. That’s some serious cash for three months of work.

The company is a giant in the Canadian financial sector with strong operations covering retail and commercial banking, capital markets, and wealth management activities.

A US$5 billion acquisition in the United States in late 2015 provided Royal Bank with a strong base to expand its private and commercial presence south of the border. In the coming years, investors could see Royal Bank make additional moves in the American market.

The company recently raised its dividend by 5% and investors should see steady dividend growth continue in the coming years.

The new payout provides a yield of 3.6%.

Is one more attractive?

Both companies are industry leaders with reliable dividends that should continue to grow.

If you only choose one, I would probably make Enbridge the first pick today. The stock is down amid the broader negative sentiment in the energy sector, and the pullback might be overdone.

Royal Bank is a great company, but the stock has enjoyed a huge rally in the past month, and it might be due to take a break.

Should you invest $1,000 in Canadian Tire right now?

Before you buy stock in Canadian Tire, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Canadian Tire wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $21,058.57!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 38 percentage points since 2013*.

See the Top Stocks * Returns as of 2/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Walker owns shares of Enbridge. The Motley Fool owns shares of Enbridge. Enbridge is a recommendation of Stock Advisor Canada.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

Oil industry worker works in oilfield
Dividend Stocks

Is CNQ Stock a Buy While it’s Below $45?

CNQ is up more than 10% in recent weeks. Are more gains on the way?

Read more »

chart reflected in eyeglass lenses
Dividend Stocks

The Smartest Dividend Stock to Buy With $1,000 Right Now

Telus (TSX:T) stock could be a smart dividend pick-up right here!

Read more »

dividends can compound over time
Dividend Stocks

Where Will Brookfield Infrastructure Partners Stock Be in 5 Years?

The pullback in Brookfield Infrastructure Partners stock is good opportunity for long-term investors with an income focus.

Read more »

3 colorful arrows racing straight up on a black background.
Dividend Stocks

These Are the Highest-Yielding Stocks on the TSX Right Now 

Let’s look at some of the highest-yielding stocks on the TSX right now and see how you can make the…

Read more »

rail train
Dividend Stocks

Canadian National Railway: Buy, Sell, or Hold in 2025?

CN is down more than 20% in the past year. Is CNR stock now oversold?

Read more »

Canadian Red maple leaves seamless wallpaper pattern
Dividend Stocks

5 Stocks for Canadian Dividend Investors

Given their solid underlying businesses, reliable cash flows, and healthy growth prospects, these five Canadian stocks are excellent buys.

Read more »

Woman in private jet airplane
Dividend Stocks

2 Bargain Stocks to Buy While They’re Still Cheap

Long-term investors looking for bargains should take a closer look at these two solid dividend stocks.

Read more »

analyze data
Dividend Stocks

Take Full Advantage of Your TFSA With These 5 Dividend Stars

These TSX stocks pay good dividends that should continue to grow.

Read more »