Retirees and other income investors are using the TFSA to boost income through high-yield dividend stocks.
Let’s take a look at three companies that have strong track records of dividend growth and offer above-average yield today.
TC Energy
TC Energy is the new name for TransCanada. The change is designed to provide a better statement on what the company does and where it operates.
TC Energy has natural gas pipeline and storage assets, power generation plants, and liquids pipeline infrastructure spread out across Canada, the United States, and Mexico. The US$13 billion purchase of Columbia Pipeline Group a few years ago added significant assets in the United States and provided a nice boost to the capital program.
TC Energy isn’t short on development opportunities. The company currently has $36 billion in projects to build, and that should ensure solid dividend growth for a number of years. Management says cash flow should increase enough to support annual dividend hikes of at least 8% through 2021.
The stock still appears oversold, despite the recent bounce. Investors who buy today can pick up a yield of 5%.
Inter Pipeline (TSX:IPL)
IPL is a niche player in the Canadian midstream energy sector with conventional oil pipelines, oil sands pipelines, and natural gas liquids (NGL) processing operations. The company also owns bulk liquids storage facilities in Europe.
The $3.5 billion Heartland Petrochemical Complex development is moving along according to plan and should be completed by the end of 2021. Once the facility is in service, IPL expects to generate annual additional EBITDA of at least $450 million.
The company recently raised the dividend and has increased the payout for 10 straight years. The current distribution provides a yield of 7.9%.
BCE (TSX: BCE)(NYSE: BCE)
BCE is one of those dividend stocks you can simply buy and stick in your income fund for decades. Growth isn’t spectacular, but the company has a very wide moat and continues to find tuck-in acquisitions that increase the user base and provide opportunities to offer additional products and services.
The media division is a nice complement to the wireless and wireline businesses. BCE is part owner of the Maple Leafs, Raptors, Argos, and Toronto FC. It also has a television network, specialty channels, and radio stations. Retail locations round out the revenue mix.
Investment in world-class network infrastructure ensures BCE can deliver the broadband capacity its customers need and has the ability to boost fees to help cover the additional costs.
The stock is off the 2018 low but still appears attractive at $56 per share and offers a solid 5.4% yield.
The bottom line
TC Energy, IPL, and BCE pay above-average dividends that should be safe. An equal investment in all three would provide an average yield of better than 6%.
