Dividend Investors: Should You Put TransCanada Corporation or Fortis Inc. in Your TFSA?

Canadians are searching for top dividend stocks to put in their TFSA portfolios.

Let’s take a look at TransCanada Corporation (TSX:TRP)(NYSE:TRP) and Fortis Inc. (TSX:FTS)(NYSE:FTS) to see if one is more attractive right now.


TransCanada has been on a bit of a roller-coaster ride in the past two years.

The stock took a nasty hit in 2015 as the oil rout and President Obama’s rejection of the company’s Keystone XL pipeline sent investors running for the exits. Contrarian types who had the courage to get in near the bottom have since picked up gains of more than 40%, and additional upside could be on the way.


President Trump is putting Keystone back in play. It’s too early to tell if his demands for approving the pipeline will be tough on TransCanada and its customers, but the project at least has a shot at being completed.

In Canada, the company’s other major pipeline, Energy East, has been sent back to square one, but the government appears committed to help Alberta’s oil producers get their product to the coast, so there is a chance Energy East will eventually go ahead.

Investors should view the major projects as a bonus and focus on the small- and medium-sized portfolio that TransCanada has in the works.

What’s going on?

Last year’s US$13 billion takeover of Columbia Pipeline Group helped boost TransCanada’s near-term commercially secured projects under development to $25 billion. As these assets are completed and go into service, TransCanada expects cash flow to increase enough to support annual dividend growth of at least 8% through 2020.

The current quarterly dividend provides a yield of 3.7%.


Fortis was also on the acquisition trail last year and purchased ITC Holdings Corp. for US$11.3 billion.

Investors initially sold the stock on the news, but the market became more comfortable as the transaction progressed, and the stock regained its lost ground.

Fortis has a strong track record of successfully integrating new businesses into the portfolio, and the addition of ITC should be positive for Fortis and its investors.

The company plans to raise the dividend by at least 6% per year through 2021. Fortis has increased its distribution every year for more than four decades, so investors should feel confident that management will deliver on the dividend-growth guidance.

Fortis pays its dividend quarterly. The $0.40 per share payout yields 3.8%.

Is one more attractive?

TransCanada’s dividend-growth projections are a bit better over the medium term, and any positive news on Keystone or Energy East could give the stock a boost.

Both names should be solid buy-and-hold TFSA picks, but if you only choose one, I would probably give the nod to TransCanada today.

How to Find Great Dividend Stocks

Over a nearly 30-year period, dividend-paying stocks earned about 18X more than their non-dividend counterparts! Yet incredibly, it’s only one part of the story. To find out how these same stocks had 45% less volatility (and how you can try to take advantage!), click here to read this exhaustive report.


Fool contributor Andrew Walker has no position in any stocks mentioned.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.