Canadian savers are turning to dividend stocks to increase the returns they get on their TFSA contributions.
Let’s take a look at three companies that might be interesting picks for your self-directed TFSA portfolio today.
Inter Pipeline (TSX:IPL)
Inter Pipeline owns and operates energy infrastructure businesses in Canada and Europe. These include oil sands pipelines, conventional oil pipelines, natural gas liquids (NGL) processing facilities and bulk liquids storage sites.
Management took advantage of the downturn in the energy sector to add strategic assets at attractive prices, including the purchase of two NGL plants and related infrastructure. The assets are performing well and helped drive the company to record results in Q3 2018.
In addition, IPL is making good progress on its $3.5 billion Heartland Petrochemical Complex that should be in service by the end of 2021.
The company just raised the monthly distribution to $0.1425 per share, which is good for an annualized yield of 8.1%.
CIBC took a hit last year as investors started to worry that rising interest rates might trigger a rise in mortgage defaults and push the Canadian housing market off the cliff.
Some people will certainly find it difficult to meet increased payments, but it looks like the Bank of Canada and the U.S. Federal Reserve are putting rate hikes on pause, so borrowers will have a chance to adjust to the increases that occurred over the past two years.
CIBC’s mortgage portfolio is large relative to its peers, but the bank has a strong capital position and the mortgage portfolio is capable of riding out a downturn in the housing market.
CIBC remains a very profitable bank and the recently acquired U.S. operations help diversify the revenue stream.
The company’s dividend continues to grow and should be very safe. At the time of writing, investors can pick up the stock at an attractive 9.5 times earnings and secure a 4.9% dividend yield.
Investors who bought Enbridge at $38 per share last year are already sitting on some nice returns, but more upside could be on the way.
The stock has recovered to $48 amid a new wave of confidence that management is finally turning the ship around after a few rough years. Enbridge has taken important steps to simplify its business structure and reduce debt. The sale of up to $10 billion in non-core assets identified after the $37 billion takeover of Spectra Energy is going well. As a result, the ongoing $22 billion near-term capital program shouldn’t need additional funding through stock sales or the issuing of new debt.
Enbridge raised the dividend by 10% for 2019 and intends to hike it by 10% again next year. The stock isn’t as cheap as it was last spring, but investors can still pick up a 6% yield.
The bottom line
Inter Pipeline, CIBC, and Enbridge all appear oversold today and offer growing dividends with above-average yield.
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fool contributor Andrew Walker owns shares of Enbridge. Enbridge is a recommendation of Stock Advisor Canada.