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TFSA Investors: 2 Top Canadian Dividend-Growth Stocks With Above-Average Yields

Canadian investors are constantly searching for reliable dividend stocks to add to their TFSA portfolios. The strategy makes sense for income investors and those looking to set aside some cash for retirement.

Why?

All earnings generated inside the TFSA are yours to keep. That’s right; the taxman doesn’t get to put his hands on one penny of the dividend payments.

This means income investors can use all of the dividends to supplement their existing salaries or pensions, and those looking to build a retirement fund can invest the full value of the distributions in new shares.

Let’s take a look at BCE Inc. (TSX:BCE)(NYSE:BCE) and Inter Pipeline Ltd. (TSX:IPL) to see why they might be interesting picks today.

BCE

BCE closed its acquisition of Manitoba Telecom Services earlier this year in a deal that vaulted the communications giant to top spot in the Manitoba market and set the company up nicely to extend its presence in the western provinces.

Expanding the mobile and wireline business is just one part of BCE’s strategy. The company has also invested heavily in building a media division, which now includes sports teams, a television network, specialty channels, radio stations, and an advertising company.

Combined, the assets create a powerful company that has the capability of interacting with most Canadians on a weekly, if not daily, basis.

Growth continues at a slow and steady pace, and BCE generates adequate free cash flow to support the dividend.

The stock has come down a bit among fears about the impact of interest rate hikes, but the market might be getting ahead of itself on that front.

At the time of writing, investors can pick up a solid 4.9% yield.

IPL

Inter Pipeline owns natural gas liquids (NGL) extraction assets, conventional oil pipelines, oil sands pipelines, and a liquids storage business in Europe.

The company reported steady results for Q2 2017 and is riding out the downturn in the oil sector in pretty good shape. Management even took advantage of the difficult times to add new assets at attractive prices last year.

In addition, IPL has about $3 billion in development projects under consideration that could be completed by the end of 2021.

IPL’s Q2 payout ratio was 72.9%, compared to 70.3% in the same period last year, so the dividend should be safe, even if cash flow bumps along at the current level until the market improves and new assets begin to contribute additional revenue.

The stock is down amid the broader sell-off in the energy space. At the time of writing, the dividend provides a yield of 7%.

Is one more attractive?

IPL looks oversold right now and offers a better yield, but the stock definitely carries more risk than BCE. Contrarian investors who can handle the volatility might want to start nibbling on the energy infrastructure player while it is out of favour.

Those who prefer a more stable pick should probably go with the telecom giant today.

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Fool contributor Andrew Walker owns shares of BCE.

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