Canadians are searching for ways to boost the returns they get on their hard-earned savings.
One strategy involves owning quality dividend-growth stocks inside a Tax-Free Savings Account (TFSA). Since the inception of the TFSA in 2009, investors now have up to $52,000 in contribution room available.
At this level, investors can generate some impressive tax-free earnings by owning a portfolio of high-yield stocks.
Let’s take a look at three Canadian companies that might of interest today.
Investors don’t often get a chance to buy an industry leader like Enbridge at a depressed price, but that’s exactly the situation today.
What’s going on?
The company’s stock has come under pressure this year amid an overall pullback in the energy infrastructure segment, but the sell-off might be overdone. Enbridge has $31 billion in commercially secured projects on the go that should drive revenue and cash flow higher in the coming years.
The company has said it expects the cash flow impact to support annual dividend increases of 10-12% through 2024.
Even if Enbridge doesn’t hit the top end of the guidance, investors are still looking at solid returns and decent dividend growth.
The stock recently bounced off the 2017 low, but it remains attractive. At the time of writing, investors can pick up a yield of 5.2%.
Inter Pipeline Ltd. (TSX:IPL)
IPL owns natural gas liquids (NGL) extraction assets, conventional oil pipelines, oil sands pipelines, and a liquids storage business in Europe.
The company has done a good job of navigating through the oil rout, and even added some strategic assets at attractive prices, including the $1.35 billion purchase of two NGL extraction facilities from The Williams Companies.
IPL is also evaluating $3 billion in development projects that could be in service by the end of 2021.
The company just raised the dividend, and more gains should be on the way as new assets boost revenue and cash flow. IPL pays a monthly distribution of $0.14 per share for an annualized yield of 6.3%.
Russel Metals Inc. (TSX:RUS)
Russel Metals is a steel distribution company with metals service centres, energy products, and steel distributors across Canada and the United States.
The company has rebounded from a tough run during the worst part of the oil downturn, and investors are enjoying some nice returns.
Russel reported Q3 net income of $34 million, or $0.55 per share compared to $16 million in the same period last year. Free cash flow in the quarter jumped to $0.90 per share from $0.38 in Q3 2016.
Russel pays a quarterly dividend of $.38 per share, so there is ample room for increases to the payout.
The stock is trading near its highs for the year, but investors can still pick up a 5.3% yield.
The bottom line
TFSA investors can still find reliable high-yield stocks to help boost the returns on their savings. An equal investment in these three names would generate an average yield of 5.6%, with strong dividend-growth prospects.