A Canadian Dividend Aristocrat is a stock that has achieved at least five consecutive years of dividend growth. That means Canadians have a nice stable of income-yielding equities to choose from. Today, I want to discuss why I’m looking past one of the top dividend titans on the TSX, Enbridge (TSX:ENB), in favour of another equity in the beginning of the summer season. Let’s dive in.
Why Enbridge stock has struggled in 2023
Enbridge is a Calgary-based energy infrastructure company. Indeed, it is the largest energy infrastructure company in North America. Shares of this energy stock have moved up marginally month over month as of close on Monday, June 19. Enbridge is still down 6.9% so far in 2023. Investors can see more of its recent performance if they want to play with the interactive price chart below.
A shaky period for the oil and gas sector has applied pressure on Enbridge and put a cap on its earnings growth.
This company released its first-quarter fiscal 2023 earnings on May 5. Enbridge posted adjusted earnings of $1.7 billion, or $0.85 per diluted share, which was mostly flat compared to $1.7 billion, or $0.84 per diluted share, in the first quarter of fiscal 2022. Meanwhile, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) were reported at $4.46 billion — up from $4.14 billion in the previous year. The company reaffirmed its adjusted EBITDA and distributable cash flow (DCF) guidance for the full year in fiscal 2023.
Investors have been attracted to Enbridge for many years because of its highly dependable business model and deep project pipeline. However, its earnings growth has recently softened. The company has achieved 27 straight years of dividend growth. It offers a quarterly distribution of $0.887 per share. That represents a very tasty 7.1% yield.
Here’s another dividend titan I’m targeting instead
First National Financial (TSX:FN) is a Toronto-based company that originates, underwrites, and services commercial and residential mortgages in Canada. Shares of this dividend titan have dropped 4.8% month over month as of close on June 19. The stock is still up 2.5% in the year-to-date period.
The company unveiled its first-quarter fiscal 2023 results on April 28. Mortgages under administration (MUA) increased 7% year over year to $133 million compared to $124 billion in the previous year. Meanwhile, First National delivered revenue growth of 23% to $432 million. Jason Ellis, president and chief executive officer (CEO), praised the company’s resilience in the face of a broader housing downturn in Canada.
First National was able to remain profitable, despite reporting lower mortgage originations. The company credited its “long-term securitization strategy that creates five- and 10-year income streams.” It also benefited from a sizable bump in MUA. First National achieved growth in both single-family and its commercial mortgage portfolios.
Why I’m buying this dividend titan today
In its first-quarter report, First National provided an outlook for the remainder of the year. The company expects to remain profitable in the face of a challenging Canada housing environment. Interest rate increases may frustrate sales growth, but First National stated that record high immigration levels and low supply should underpin the strength of the market.
Shares of this dividend titan currently possess a very favourable price-to-earnings ratio of 13. First National has delivered 11 consecutive years of dividend growth. The stock last paid out a quarterly dividend of $0.20 per share, which represents a very strong 6.2% yield.
