MENU

2 Dividend-Growth Stocks for Your TFSA Retirement Fund

Canadian investors are searching for attractive dividend-growth stocks to add to their Tax-Free Savings Account (TFSA) portfolios.

Let’s take a look at Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) and Enbridge Inc. (TSX:ENB)(NYSE:ENB) to see why they might be interesting picks.

CIBC

CIBC just received shareholder approval for its takeover of Chicago-based PrivateBancorp. The company had to increase its offer two times to secure the deal, but the acquisition should turn out to be positive for shareholders in the long run.

Why?

CIBC refocused its efforts on Canada in the wake of the Great Recession. That move has been very profitable for the company in recent years, but pundits have become increasingly concerned that CIBC might get hit harder than its peers if the Canadian housing market hits the skids.

Adding an American bank to the asset mix helps diversify the revenue stream and positions CIBC to expand its presence in the U.S. market.

A meltdown in Canada would still hit the bank hard, but at least there is a larger U.S. hedge now.

CIBC trades at a significant discount to the other big Canadian banks. Some spread is expected given the perceived higher risk, but at 9.1 times trailing earnings, the stock is starting to look cheap.

The bank sector remains in a downward trend, so I wouldn’t back up the truck just yet, but contrarian investors might want to start nibbling on further weakness.

The dividend should be safe and currently yields 4.75%.

Enbridge

Enbridge recently closed its $37 billion acquisition of Spectra Energy in a deal that creates North America’s largest energy infrastructure company.

Spectra’s strategic natural gas assets provide a nice complement to Enbridge’s strong liquids pipeline operations.

The deal also bumped up the near-term development portfolio to $27 billion. Longer-term projects are valued at $48 billion.

As the new assets are completed and go into service, Enbridge expects cash flow to improve enough to support annual dividend growth of at least 10% through 2024.

Enbridge has a solid track record of raising its payout, so investors should feel comfortable with the guidance.

The dividend is paid quarterly and yields 4.5%.

Is one more attractive?

Both stocks should be solid long-term holdings for a TFSA retirement fund, especially if the dividends are used to purchase more shares.

Enbridge probably offers better dividend-growth prospects over the medium term, so I would likely give the pipeline operator the edge today.

1 Massive Dividend Stock to Buy Today (7.8% Yield!) - The Dividend Giveaway

The Motley Fool Canada's top dividend expert and lead adviser of Dividend Investor Canada, Bryan White, recently released a premium "buy report" on a dividend giant he thinks everyone should own. Not only that - but he's created a must-have, exclusive report that outlines all the alarming traits of dividend stocks that are about to blow up - and how you can avoid them.

For this limited time only, we're not only taking 57% off Dividend Investor Canada, but we're offering you special access to two brand-new reports, free of charge upon signing up. They will outline everything you need to know so you steer clear of dividend burn-outs AND take advantage of the dividend giants in the Canadian market.

While this offer is still available, you can find out how to get a copy of these brand-new reports by simply clicking here.

Fool contributor Andrew Walker has no position in any stocks mentioned. The Motley Fool owns shares of Enbridge. Enbridge is a recommendation of 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.