For Canadian investors reliant on dividend income, the landscape presents a complex puzzle. Former low-risk, steady payout harbors Telus Corporation (TSX:T) and Enbridge (TSX:ENB) now face significant headwinds: one burdened by high leverage, the other potentially confronting industry disruption. This raises a critical question: does it still make sense to accumulate these stocks for their dividends?
Enbridge’s core strength—transporting roughly 30% of North America’s crude oil—could become a vulnerability amid geopolitical shifts. U.S. moves to manage Venezuelan oil refining could intensify competition for Canadian crude. Should U.S. imports from Canada decline, the economic value of Enbridge’s cross-border pipelines could suffer.
However, change will not be instantaneous. As seen with the accelerated LNG exports from North America to Europe post-2022, reshaping energy supply chains requires years and massive infrastructure investment. Enbridge’s opportunity lies in Canada’s pursuit of oil export market diversification (e.g., to Asia and Europe), which could spur new pipeline demand. Furthermore, the company has strategically increased its investment in natural gas pipelines over the past three years to diversify risk.
In a best-case scenario, Enbridge could follow its plan for 3% dividend growth in 2026, resuming ~5% annual growth from 2027 onward. A worst-case scenario might see a pause in dividend growth for several years, breaking its nearly three-decade growth streak. The outcome largely hinges on the progress of U.S.-Canada trade negotiations, though its current 60-70% payout ratio provides a considerable safety cushion.
Unlike Enbridge, Telus has proactively paused dividend growth to redirect cash flow toward repairing its balance sheet and reducing leverage. Management states growth will resume once the share price and dividend yield “reflect the company’s true fundamentals.” The stark reality behind this: Telus stock is down approximately 49% from its 2022 peak, trading near 10-year lows, which has catapulted its dividend yield to a striking 8.8%.
A $5,000 investment today could buy about 265 Telus shares, generating an estimated annual dividend income of $443. This figure surpasses the projected 2028 dividend income from a similar investment in Enbridge by 38.5%. In other words, Telus’s current high yield offers substantial cash flow even if the dividend remains static for the next three to five years.
Yet, high yield carries high risk. Telus’s payout ratio, including shares issued under its Dividend Reinvestment Plan (DRIP), has exceeded 100% for three consecutive years. If the company cannot effectively reduce debt and boost free cash flow to bring the ratio to a sustainable level (below 100%), a dividend cut becomes an imminent risk. A 33% reduction would instantly erase its yield advantage.
From a pure yield-maximization and potential capital appreciation standpoint, Telus—trading at a depressed level—appears compelling. Successful deleveraging could drive share price recovery, and the company offers a DRIP. However, for absolute dividend safety, Enbridge, with its more conservative payout ratio, is the more reassuring choice.
For most Canadian dividend investors, an either-or decision may be unnecessary. A viable risk-mitigation strategy is a portfolio approach: allocating a larger portion (e.g., $4,000) to Telus to capture its high yield and rebound potential, while dedicating a portion (e.g., $1,000) to Enbridge as a “stabilizer” against potential dividend cuts. This balances overall return potential with specific stock risk.
The final choice hinges on risk tolerance: pursue Telus’s high yield with its associated uncertainty, or favor Enbridge’s stability while accepting its relatively lower current yield and industry transition risks. In today’s uncertain market, balance may be the wiser long-term strategy.
