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2 Rising Dividend Stocks to Boost TFSA Returns

Canadians are searching for top dividend stocks to add to their TFSA portfolios.

Let’s take a look at two companies that are recovering from recent sell-offs and still offer attractive yields.

TransCanada Corporation (TSX:TRP)(NYSE:TRP)

TransCanada is back up to $58 per share from the $53 low it hit in early February. That’s still down from the 12-month high of $65, so investors could see more gains in the coming months.


TransCanada recently reported solid Q4 2017 earnings of $719 million, or $0.82 per share. This was better than the $626 million, or $0.75 per share, the company earned in Q4 2016. The full year 2017 generated comparable earnings of $2.7 billion, or $3.09 per share, compared to $2.1 billion, or $2.78 per share, the previous year.

TransCanada is working on $23 billion in near-term projects that should be completed through 2021. As a result, management sees cash flow increasing enough to support annual dividend growth of at least 8% over that time frame.

The company has an additional $20 billion in medium- to longer-term projects on the drawing board, including Keystone XL, GasLink, and the Bruce Power life extension.

If these developments finally go ahead, TransCanada could boost the dividend-growth guidance. In the meantime, investors can pick up a 4.75% yield.

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM)

CIBC is back up to $119 per share after a dip from close to $122 in January to below $114.

The bank often gets hit harder than its larger Canadian peers when the market pulls back. This is due to concerns about the exposure to the Canadian housing market. CIBC has a large mortgage portfolio, and any hint of potential economic turbulence in Canada tends to make investors nervous. Rising interest rates are the latest worry.

To address these concerns, CIBC made a series of acquisitions in the U.S. in the past year that go a long way to helping diversify the revenue stream. Investors could see more deals in the coming years.

Overall, things are pretty good. CIBC just reported strong results for fiscal Q1 2018, with solid performances from all four of the bank’s strategic business units. Management increased the quarterly dividend from $1.30 to $1.33 per share, so the executive team must be comfortable with the revenue and earnings outlook.

CIBC trades at a discount to the larger Canadian banks and currently provides a yield of 4.5%.

Is one a better bet?

Both stocks have come off the recent lows, but more gains could be on the way, and the dividend-growth potential is attractive in these names. At this point, TransCanada still looks oversold, and any positive news on the long-term projects could send the stock back to the 12-month high.

As such, I would probably make the energy infrastructure company the first choice today.

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

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