The Motley Fool

Retirees: 2 Dividend-Growth Stocks for Your TFSA Income Portfolio

Pensioners are searching for top dividend stocks to help boost their retirement income.

Let’s take a look at TransCanada Corporation (TSX:TRP)(NYSE:TRP) and Fortis Inc. (TSX:FTS)(NYSE:FTS) to see why they might be interesting picks right now.

TransCanada

TransCanada had a tough run in 2015 as falling oil prices and President Obama’s rejection of the Keystone XL pipeline scared investors out of the stock.

Contrarian types who realized the sell-off was overdone and stepped in at the bottom are now sitting on gains of close to 50%.

What happened?

Oil prices recovered last year and TransCanada made an important acquisition with its takeover of Columbia Pipeline Group. The deal gave TransCanada important access to the Marcellus and Utica shale plays as well as strategic natural gas pipeline infrastructure running to the Gulf Coast.

The addition of Columbia also boosted the development portfolio to the point where TransCanada now has $23 billion in commercially secured near-term projects on the go that should be completed and in service by 2020.

As the new assets go into service, TransCanada expects cash flow to increase enough to warrant annual dividend hikes of at least 8%.

The company’s mega-projects remain a question mark, but good news might be on the horizon.

Keystone XL is back on the negotiating table after the Trump election win, and there is a reasonable chance the pipeline will get built.

As for Energy East, the massive project designed to bring Alberta’s oil to the Canadian east coast, TransCanada is pretty much back to square one, but investors shouldn’t consider the project dead just yet. Ottawa appears willing to help get Canadian oil to the coast, so Energy East might still get the green light.

TransCanada just raised its quarterly dividend by more than 10% to $0.625 per share. The distribution now offers a yield of 4%.

Fortis

Fortis owns natural gas distribution, power generation, and electricity transmission assets in Canada, the United States, and the Caribbean.

The company spent US$11.3 billion last year to acquire ITC Holdings Corp., the largest independent transmission company in the United States.

Investors initially sold Fortis on the news, but the stock bounced back once the market became more comfortable with the deal.

Fortis has raised its dividend every year for more than four decades, and the strong trend looks set to continue. Management plans to boost the payout by at least 6% per year through 2021.

The current payout offers a yield of 3.8%.

Which stock is best?

Both companies are proven buy-and-hold picks for income investors and should be solid additions to any TFSA.

That said, TransCanada probably offers better dividend-growth potential over the medium term, and any good news on the mega-projects could send the shares sharply higher.

As such, I would make the pipeline giant the first choice today.

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share. Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune. Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

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

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.

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.