Enbridge Inc. or Inter Pipeline Ltd.: Which 7% Dividend Stock Should You Buy Now?

Between Enbridge Inc. (TSX:ENB)(NYSE:ENB) and Inter Pipeline Ltd. (TSX:IPL), one high-yield stock looks particularly compelling right now.

| 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

If you screen large-cap Canadian stocks for high yields today, Enbridge Inc. (TSX:ENB)(NYSE:ENB) and Inter Pipeline Ltd. (TSX:IPL) will likely top the list with their delectable 6.8% and 7.6% yields, respectively.

Both energy stocks have tumbled more than 20% each in the past one year, pushing up their yields. Of course, that’s not the only factor, as Enbridge and Inter Pipeline also boast a solid record of consistent dividend increases, which is why their yields aren’t really risky. On the contrary, the drop in the stocks should make income investors look for opportunities.

The question is, which among the two stocks is a better buy today? When you stack Enbridge and Inter Pipeline against key dividend parameters, you have a clear winner.

Dividend history

Enbridge and Inter Pipeline are both energy infrastructure companies that transport, process, and store energy products such as crude oil, liquids, and natural gas. Enbridge, however, is the giant with a market cap $66.7 billion, more than eight times that of Inter Pipeline.

Enbridge has been around for longer than Inter Pipeline and has come to enjoy the economies of scale and size over the decades. Not surprisingly, Enbridge has a longer dividend track record — it has raised its dividends every year for 23 consecutive years now.

Inter Pipeline has increased its dividends every year for 15 straight years.

Winner: Enbridge

Dividend frequency

For some income investors, especially retirees, the frequency with which dividends are paid could make a huge difference to their flow of income.

Enbridge, like most stocks, pays dividends quarterly. Inter Pipeline cuts you a dividend cheque every month, which is praise-worthy.

Winner: Inter Pipeline

Dividend growth

While steady dividends are an important investment decision criterion, what matters most is whether the dividends are also growing.

Enbridge rewarded shareholders with a 15% hike in dividends in 2017, while Inter Pipeline offered a tiny 3.7% increase for the full year.

If you go back some years, Enbridge has grown its dividend at a compounded average annual rate of 11.7% over the past 20 years. That’s an incredible record given the cyclical nature of the energy sector.

Inter Pipeline hasn’t done too badly either, having grown its dividends at a compounded average clip of 7.2% in the past decade. A higher growth rate over a longer span, however, scores Enbridge a brownie point.

Winner: Enbridge

Future dividend-growth potential

As great as a company’s dividend history might be, it’s not necessary that it will continue to maintain the trend. Therefore, a stock’s dividend-growth potential should be your highest-weighted factor when picking dividend stocks.

Inter Pipeline’s full-year payable dividend quantum for 2018 amounts to $1.68 per share, representing a 3% growth versus 2017.

Comparatively, Enbridge has already committed to a 10% compounded growth in dividends between 2018 and 2020.

Winner: Enbridge

Foolish takeaway

By all means, it looks like Enbridge will continue to reward shareholders with double-digit dividend hikes in coming years and beat Inter Pipeline in the game. Enbridge’s dividends also look sustainable, as 96% of its earnings originate from predictable fee-based contracts, resulting in stable cash flows.

With the stock shedding nearly 30% value in one year, income investors could easily consider adding Enbridge to their portfolio to enjoy its hefty yield.

Should you invest $1,000 in Dollarama right now?

Before you buy stock in Dollarama, 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 Dollarama 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 $20,697.16!*

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 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

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 Neha Chamaria has no position in any of the stocks mentioned. 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

dividend growth for passive income
Dividend Stocks

Why I’d Invest in Canadian Value Stocks for Both Stability and Growth

Three Canadian value stocks are buying opportunities for investors looking for stability and growth.

Read more »

investment research
Dividend Stocks

Got $15,000? 3 Blue-Chip Stocks Every Canadian Should Consider

Here's why investing in blue-chip TSX stocks such as CNQ and CNR should derive outsized gains in 2025 and beyond.

Read more »

protect, safe, trust
Dividend Stocks

Where I’d Allocate $20,000 in 2 Safer High-Yield Dividend Stocks for Retirement Needs

Here are two safer, high-yield dividend stocks I'm looking at for my retirement needs.

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

3 Reasons I’m Considering Enbridge Stock for a $5,000 Investment This April

I'm considering Enbridge stock to provide some defensive appeal and a juicy dividend to my long-term portfolio.

Read more »

monthly desk calendar
Dividend Stocks

A 9.2% Dividend Stock Paying Cash Every Single Month

With one of the highest dividends out there, this dividend stock deserves attention in your portfolio.

Read more »

Happy golf player walks the course
Dividend Stocks

Build a Powerful Passive Income Portfolio With Just $20,000

If you are worried that the bear market could reduce your savings, these stocks can build a powerful passive income…

Read more »

Hand Protecting Senior Couple
Dividend Stocks

How I’d Use My $7,000 TFSA Contribution to Start Retirement Planning

These TSX stocks have solid fundamentals and are well-positioned to deliver significant tax-free total returns over time.

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

How to Turn Your TFSA Into a Gold Mine Starting With Only $10,000

It doesn't have to be complicated or scary. You can turn any portfolio into a major gold mine.

Read more »