Fortis (TSX:FTS) and Enbridge (TSX:ENB) are two very talked-about dividend shares in Canada. Each pay enticing dividend yields. Nonetheless, they’ve totally different ranges or danger and reward that buyers have to think about. If you’re in search of a top quality dividend inventory however questioning which one to purchase, here’s a breakdown of every.

Fortis inventory: A mannequin of consistency

With a inventory worth of $54.60, Fortis has a market capitalization of $26 billion. It operates 10 regulated transmission and distribution utility companies throughout Canada, the U.S., and the Caribbean. 99% of its revenues are from regulated operations, so it captures a predictable baseline of earnings.

Typically, Fortis enterprise is fairly boring. Nonetheless, consistency is essential within the utility business, and Fortis has delivered that.

Over the previous 10 years, it has grown earnings per share (EPS) by a gentle 5% compound annual development charge. In 2022, it can doubtless develop incomes per share by 6.5%. Its inventory has principally mirrored its earnings-per-share development with a median 4.8% compounded annual inventory return for the last decade.

In the event you take into account dividends, it’s onerous to discover a higher inventory. Fortis has grown its dividend consecutively for 49 years. Proper now, its dividend-payout ratio sits at 78%, which signifies its sustainability.

Fortis has a $22.3 billion capital that it anticipates will develop its charge base by a compounded 6.2% annual charge to 2027. Given its anticipated development, it continues to count on 4-6% annual dividend development for the close to future.

Enbridge: Greater dividend however extra risky and better danger

Enbridge is considerably bigger and extra diversified than Fortis inventory. With a worth of $54.28, it has a market cap of $109 billion. It operates among the most vital oil and fuel pipelines throughout North America. For context, 30% of the oil produced in North America is transported by Enbridge’s system.

It additionally has pure fuel utilities, storage services, LNG export terminals, and renewable energy tasks. These diversified operations definitely assist to unfold out its danger. Nonetheless, Enbridge’s enterprise is commodity-centric, which implies it tends to commerce in lockstep with world power sentiment. Its inventory has traditionally been extra risky than Fortis inventory.

Enbridge has grown earnings per share by a 6.1% compound annual development charge over the previous 10 years. Nonetheless, its earnings have fluctuated greater than Fortis’s alongside the way in which.

In 2022, it ought to develop earnings by about 7% to $2.94 per share. Its inventory has underperformed its earnings-per-share development. Enbridge inventory has solely delivered a 2.2% annualized inventory return over the previous 10 years.

Enbridge has a $9 billion capital plan. It hopes to accrete 5-7% annual money circulation development over the following few years. Its dividend, nevertheless, is simply anticipated to develop by the low single digits. Proper now, it has an earnings-payout ratio of 117%, which suggests it’s paying out extra dividends than revenue it’s incomes.

Fortis inventory or Enbridge? What’s a greater purchase?

Fortis inventory earns a 4.13% dividend yield. Enbridge earns 6.5% dividend yield. Whereas Enbridge has a extra enticing dividend, buyers do have to be just a little bit cautious.

Through the years, it has issued debt to cowl its earnings shortfall to pay its outsized dividend. Whereas this has labored in a low rate of interest surroundings, dearer debt might prohibit its skill to lift capital (and lift its dividend).

Fortis has been very prudent and disciplined about the way it manages its money flows and dividends. Given this, Fortis is probably going the higher decide for steady secure revenue. On the flip facet, Enbridge is likely to be the inventory for a much bigger dividend, however you need to settle for the next degree of enterprise and monetary danger.