Algonquin Power & Utilities (TSX:AQN) and Enbridge (TSX:ENB) are just two dividend stocks that have taken major hits to the chin in recent quarters. Undoubtedly, it can be worrisome as a passive income investor to see shares sag as a yield swells.
Dividend cuts are a top concern when yields swell quickly amid headwinds. And though Enbridge’s dividend yield has fattened up lately, with shares currently sporting a yield of 7.58%, I don’t view the payout as in jeopardy, especially given Enbridge’s managers have a history of keeping shareholders happy when it comes to the payout.
As for Algonquin, many investors may have given up on the firm when it reduced its dividend a while back. Indeed, the company used to be seen as a dividend growth juggernaut. Nowadays, it’s a renewable energy play that’s broken a lot of hearts. Today, shares of AQN trade for around $10 per share. The stock is down more than 55% from its all-time high, and though the dividend yield stands at a modest 5.86%, I think the stock is worth giving the benefit of the doubt if you believe that the firm can turn things around.
Without further ado, let’s compare Algonquin Power & Utilities with Enbridge to see which may be the better bet for dividend-hungry investors looking to get a good value going into the fall season.
Algonquin Power & Utilities
It’s been a painful fall for Algonquin. Up ahead, the company could be in a spot to sell its renewable energy division. Further, Arun Banskota recently stepped down from his role of chief executive officer, with Chris Huskilson taking on the role as interim. Indeed, there are a lot of moving parts over at the company right now. With that, no shortage of uncertainty. Fortunately, I view the stock as a deep-value play as it moves forward after its historic plunge.
The $6.94 billion company goes for around 1.03 times price to book. Not at all a high price to pay, given the impressive assets you’ll get. If all goes well, AQN stock will get a fair price for its assets on sale and could be in a spot to recover more ground from here, perhaps toward the $12 mark.
It’s a turbulent time for Algonquin. If you have the patience and stomach, though, shares may be worth stashing on your radar.
Though Alqonguin has more upside potential, I view Enbridge as the better bet for most. The dividend yield of 7.58% is a large reason why! It’s not just a fat yield; it’s one that looks quite safe. Though Enbridge faces uncertainties of its own, I think it’s hard to ignore its cash-generating assets and its recent second-quarter pop in profit.
Yes, the stock is under pressure, but I think Mr. Market has it wrong. Down around 20% from its high, ENB stock has a lot of negative momentum behind it. However, I think it’s worth braving it if you’re looking for cheap (but safe) yield!
Indeed, Enbridge stock is a tough hold as shares sag ahead of a potential Canadian recession. Regardless, I continue to view Enbridge as one of the best value and dividend plays in the entire Canadian market. Pipelines aren’t exciting. But they are capable of generating ample amounts of cash. For that reason, I think Canadians would be wise to stick by the name as it continues to go through hard times.
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* Returns as of 8/16/23
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