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Which Top Dividend Stock Is Better for Your TFSA: Enbridge Inc. or Altagas Ltd.?

Canada’s Tax-Free Saving Accounts (TFSAs) provide a great incentive to new investors who want to earn tax-free returns.

As you slowly build your TFSA portfolio, you have to decide which stocks match your investing style. Canada’s utility and pipeline stocks are top dividend payers that suit long-term investors.

My two favourite picks from this space are Enbridge Inc. (TSX:ENB)(NYSE:ENB) and Altagas Ltd. (TSX:ALA). Let’s find out which stock is better for your TFSA.


Toronto-based Enbridge is one of the largest utilities in North America. It runs the largest pipeline network in the continent. That means companies in the energy supply chain are dependent on its network for shipping their products to the markets.

The company is also a leader in gathering, transportation, processing, and storage of natural gas in North America, serving about 3.5 million retail customers in Ontario, Quebec, New Brunswick, and New York State.

This unique combination of serving energy companies and providing gas and power to North American consumers makes Enbridge a great cash cow for TFSA investors.

The company has a consistent track record of delivering annual dividend increases. Enbridge has paid dividends for over 64 years to its shareholders. In 2017, it hiked its payout 10%, increasing the quarterly dividend to $0.671. This translates into $2.684 per share on an annualized basis for 2018. Over the past 20 years, the dividend has grown at an average compound annual growth rate of 11.7%.

The timing is great for new investors to snap up this top dividend stock, which is trading at attractive levels after a 13% slide during the past one year. Trading at $49.17 and offering a juicy 4.87% dividend yield, this stock is my all-time favourite.


Altagas, a Calgary-based power and gas utility, has a different appeal for TFSA investors. The utility, with a 7.27% dividend yield, supports one of the highest returns in this category. Altagas pays a $0.1825-a-share monthly distribution, which comes to $2.19 a share yearly.

The amount of the distribution has increased ~50% from the $0.12 a share that was being paid five years ago. The company plans to hike it payouts by 8% each year through 2019.

But Altagas has a different risk profile when compared to Enbridge. It’s trying to grow organically with plans to conclude a $8.4 billion deal to buy U.S.-based WGL Holdings, Inc. this year.

Investors stayed away from this stock last year on concerns that the company may find it tough to fund this transaction, sending its share price down 13% to $29.08

Which stock is better for a TFSA?

I think Enbridge stock is a better pick for new investors due to its stable dividend payouts. The stock is good for those investors who want to buy and hold for a long time and reap the benefits of growing dividends.

Altagas is a little risky with a big hurdle to cross this year. If you can stomach the risk, then you can certainly make a higher return on this investment.

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Fool contributor Haris Anwar owns shares of ENBRIDGE INC. The Motley Fool owns shares of Enbridge. Altagas and Enbridge are recommendations of Stock Advisor Canada.

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