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Beef Up Your TFSA with 2 Cheap Dividend Stocks

Finding top-quality dividend stocks that you can add in to your Tax-Free Saving Accounts should be the number one priority if you are using this savings tool to build your nest egg.

Markets sometimes present opportunities that are too good to be true – and smart investors snap up these opportunities quickly before the window closes.

As we head into 2018, I see two such stocks in the Canadian market that are not only selling cheap, but also have a good upside potential next year. Let’s figure out whether they are good investments to produce steady retirement income for you.

RioCan Real Estate Investment Trust (TSX:REI.UN)

Real estate investment trusts (REITs) are great investment vehicles for TFSA investors to boost their income by receiving monthly dividend distributions. Investing in REITs means you don’t have to manage rental properties. Instead, professionals manage them for you with a clear mandate to increase monthly dividends.

Another benefit of investing in REITs is the advantageous tax treatment these companies get in Canada. REITs pay distributions before they pay tax to the taxman, which means more income for unitholders.

RioCan, Canada’s largest REIT, manages about 300 retail properties across Canada and has some of the biggest retail names as its clients. The company pays a monthly distribution of $0.1175 per unit, or a 5.83% annualized yield at the time of writing.

Its shares have pulled back this year on rising interest rates and fears that RioCan will have trouble finding long-term tenants as brick-and-mortar retail model comes under threat due to rising e-commerce shopping. Its shares are down ~7%, while the benchmark S&P/TSX Composite Index is up over 3.27% this year.

But RioCan has a plan to counter this threat. It is exiting from smaller Canadian markets and focusing on the nation’s six largest population centres.

Despite these uncertainties, RioCan has generated a consistent growth in funds from operations (FFO) — a most important measure for shareholders. FFO grew 14% in the past five years to $1.68 a share in 2016.

Along with increasing FFO, RioCan has also maintained a higher occupancy ratio. Its committed occupancy improved by 150 basis points to 96.8% in the third-quarter of this year when compared with the same period a year ago.

Enbridge Inc. (TSX:ENB)(NYSE:ENB)

Enbridge stock is another opportunity for TFSA investors to consider as 2017 concludes. One of the most coveted names among Canada’s dividend payers, Enbridge’s dividend yield is nearing record levels at ~5% . The time is right to add this name to your portfolio.

The company’s share price has shed ~13% of its value amid concerns that the world’s largest pipeline operator is taking on too much debt for its growth projects, and will be unable to maintain a double-digit growth in its dividend.

But these concerns are short-term in nature. In late November, Enbridge’s management tried to allay these fears by announcing an impressive plan to fund its major development projects and cut its debt load.

That plan includes issuing $1.5 billion of shares and selling at least $3 billion in assets.  Enbridge has also identified another $7 billion in non-core assets to divest, including unregulated gas gathering and processing businesses and onshore renewables in the U.S. and Canada.

With its history of dividend payment spanning more than six decades, Enbridge is a great income stock to contribute to your TFSAs in 2018. Enbridge plans to hike its dividend by 10% each year through 2020.

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Fool contributor Haris Anwar has no position in any stocks mentioned. The Motley Fool owns shares of Enbridge. Enbridge is a recommendation of Stock Advisor Canada.

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