Enbridge (TSX:ENB) and BCE (TSX:BCE) offer generous dividends with high yields. Retirees and other dividend investors seeking passive income are wondering if ENB stock or BCE stock is undervalued today and good to buy for a self-directed portfolio.

Enbridge

Enbridge is a giant in the North American energy infrastructure sector, with a current market capitalization of about $108 billion. The company's size gives management the financial firepower to make large strategic acquisitions in the oil and natural gas segments to complement growth driven by its capital program.

Enbridge trades near $50 per share at the time of writing. The stock hit a 12-month low near $43 last fall before bargain hunters started buying Enbridge on expectations of cuts to interest rates in 2024. The Bank of Canada has already reduced its rate by 0.25%, and the U.S. Federal Reserve could start lowering rates as early as September, according to analysts. Enbridge uses debt to fund its growth initiatives, so the reduction in borrowing costs should provide added momentum for the stock.

Enbridge is in the process of finalizing its US$14 billion purchase of three natural gas utilities in the United States. The company also has $25 billion in secured capital projects lined up over the next few years. As new assets bring in added revenue, the anticipated result is annual growth in distributable cash flow of 3% through 2026 and 5% after that timeframe. This should support ongoing annual dividend increases in the same range.

Enbridge hiked the dividend in each of the past 29 years. At the current share price, investors can get a 7.4% dividend yield. It wouldn't be a surprise to see ENB drift back to the 2022 high, near $59, by the end of 2025.

BCE

BCE is arguably the contrarian pick among these two stocks. The communications giant's share price fell from $74 in 2022 to below $43 in recent weeks. High interest rates are to blame for much of the decline, but BCE is also facing revenue headwinds in its media business. Management announced staff cuts of roughly 6,000 positions in the past year to position the business to meet financial targets. The company also sold or closed dozens of radio stations and has trimmed programming across the television assets.

Despite the headwinds, BCE expects to deliver 2024 revenue that is similar to 2023, driven by the strength of the mobile and wireline networks segments. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) are expected to be slightly higher in 2024 compared to last year. This should support the generous dividend heading into 2025.

BCE isn't without risk. The dividend yield is 8.7% at the current share price near $46 and was above 9% a few weeks ago when the stock dipped to levels not seen in more than a decade. While unlikely, there is a possibility that the distribution could get cut if revenues decline over the next couple of years.

That being said, the extent of the pullback in the share price looks overdone at this point and a bounce is possible as investors transition out of tech winners and into unloved dividend stocks.

Is one a better bet?

BCE offers the higher yield and arguably has more upside potential on a rebound, but it is probably a riskier pick right now. Enbridge's yield remains very attractive, and the upward trend in the stock could have some legs if interest rates start to fall in the United States in the coming months.

Contrarian investors who can handle added risk and are seeking the highest yield might want to start nibbling on BCE at this level. I would probably make ENB the first choice today or maybe split a new investment between the two stocks.

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