Canadian income investors are searching for top dividend picks to put in their TFSAs.
TransCanada is an energy infrastructure company that operates natural gas pipelines, gas storage facilities, oil pipelines, and power-generation assets.
The company had a tough run through 2015 with the oil downturn and President Obama’s rejection of the Keystone XL pipeline, but last year proved to be much better for investors, as energy markets began to recover and TransCanada made a key strategic acquisition.
What’s the scoop?
TransCanada purchased Columbia Pipeline Group for $13 billion in a deal that added significant natural gas assets, including facilities in the growing Marcellus and Utica gas plays, as well as pipeline infrastructure running to the Gulf Coast.
Difficult times continue in the energy sector, but TransCanada has a solid $25 billion in commercially secured small- and medium-sized projects on the go to keep it busy. As the new assets are completed and go into service, TransCanada expects to see cash flow grow enough to support annual dividend increases of at least 8% through 2020.
The company’s mega-projects are also worth watching. Keystone could get the green light from Donald Trump, and TransCanada’s Energy East project in Canada still has a shot at being built.
The stock currently pays a quarterly dividend of $0.565 per share for a yield of 3.75%.
Bank of Nova Scotia
Investors often skip Bank of Nova Scotia in favour of its two larger peers, but the stock is starting to gain more attention.
Bank of Nova Scotia has invested heavily in building a large international business with the majority of the assets located in Mexico, Colombia, Peru, and Chile.
The four countries represent the core of the Pacific Alliance, which is a trade bloc set up to promote the free movement of goods and capital. With a combined consumer market of roughly 200 million people, the group offers significant opportunities as the middle class expands.
Bank of Nova Scotia is already seeing strong results from the region. The international group delivered annual earnings of $2 billion in fiscal 2016 — a milestone for the division. The Pacific Alliance region led the way, generating double-digit deposit and asset growth.
Bank of Nova Scotia raised its dividend twice in 2016 for a total increase of 6% for the year. The company has a strong history of dividend growth, and investors should see the trend continue.
The current quarterly payout of $0.74 per share yields 3.85%.
Is one a better bet?
A year ago, I would have picked Bank of Nova Scotia as the first choice, but the stock has rallied to the point where I would probably call it a coin toss between the two names today.
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Fool contributor Andrew Walker has no position in any stocks mentioned.