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2 Dividend-Growth Stocks to Provide Steady Income

Investors often turn to dividend stocks to generate additional income. This is particularly the case with retirees who are using their TFSAs to collect tax-free payments on their savings.

Let’s take a look at TransCanada Corporation (TSX:TRP)(NYSE:TRP) and Telus Corporation (TSX:T)(NYSE:TU) to see why they might be interesting picks.

TransCanada

TransCanada bought Columbia Pipeline Group last year in a US$13 billion deal that added important assets in the growing Marcellus and Utica shale plays, as well as key pipeline infrastructure running from Appalachia to the Gulf Coast.

The purchases also provided a nice boost to the capital plan.

In the latest quarterly report, TransCanada said it has $24 billion in near-term capital projects on the go that should provide enough earnings and cash flow growth to support annual dividend increases of at least 8% through 2020.

This doesn’t include the large Keystone XL project, which has run into some roadblocks in recent years. The pipeline is back on the table under the new U.S. administration, and TransCanada is expected to make a decision on the project in the coming months. If Keystone XL goes ahead, investors could see an upgrade to the dividend-growth guidance.

TransCanada pays a quarterly dividend of $0.625 per share for an annualized yield of 4%.

Telus

Telus works hard to keep its clients happy, and the effort shows up in the numbers.

The company reported a record-low postpaid subscriber churn rate of 0.79% in Q2 2017. Postpaid net wireless customer additions came in at 99,000, and the business picked up 17,000 new high-speed internet clients as well as 5,000 new Telus TV subscribers in the three-month period.

Telus has avoided the temptation to spend billions on media assets. Some investors might think the decision will hurt the company down the road, and that could turn out to be the case, but the lack of a media group doesn’t appear to be having a negative effect right now.

Telus has other initiatives on the go that could prove to be very lucrative, including its operations in the healthcare sector. Telus Health is already a leader in the Canadian market providing digital solutions to doctors, hospitals, and insurance companies.

The company has a strong track record of dividend growth, and that trend should continue. The current payout provides an annualized yield of 4.4%.

Is one more attractive?

Both companies offer attractive dividends for income investors.

If you simply want the higher yield, go with Telus today.

If you can handle a bit more volatility, TransCanada might offer better dividend-growth prospects in the medium term as well as a shot at some nice upside in the stock price if Keystone gets the green light.

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

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