Retirement Alert: 2 High-Yield Dividend Stocks for TFSA Income Investors

Here’s why BCE Inc. (TSX:BCE)(NYSE:BCE) and another top Canadian dividend stock deserve to be on your radar today.

| More on:
Path to retirement

Image source: Getty Images

Canadian income investors are using their TFSAs as an effective vehicle for generating earnings to supplement their pension payments.

The strategy makes sense, as any income that is created inside the TFSA is tax-free and isn’t counted when the Canada Revenue Agency calculates possible clawbacks on government payouts.

Let’s take a look at three stocks that might be interesting picks right now for an income portfolio.

BCE (TSX:BCE)(NYSE:BCE)

BCE has regained much of the losses it incurred last year, but more upside could be on the way and investors can still pick up a generous 5.3% yield.

The company posted solid Q4 2019 results and is targeting steady earnings and free cash flow growth. The dividend just increased by 5% and investors should see ongoing annual hikes that are close to that amount.

BCE has a wide moat, supported by its state-of-the-art fibre network that runs straight to millions of Canadian homes and businesses. The company has the power to raise prices when it needs extra cash and the media division is a nice complement to the wireless and wireline operations.

The stock currently trades at $59 per share, but it could take a run at the previous high near $63, especially if the market believes the next Bank of Canada move will be a rate cut. Falling interest rates tend to push funds into reliable dividend stocks such as BCE.

Enbridge (TSX:ENB)(NYSE:ENB)

Enbridge dipped below $40 per share last spring amid investor concern about debt levels and long-term growth opportunities.

Savvy investors who bought the stock at that point are sitting on some nice gains and the recent momentum should continue.

Enbridge hit a number of turnaround milestones in 2018, including the repurchase of four subsidiaries. It also negotiated agreements for the sale of close to $8 billion in non-core assets that were identified through a strategic review the previous year.

Enbridge is focusing its investment and realignment on regulated businesses, which should provide stable and predictable revenue and cash flow in the coming years.

Management increased the dividend by 10% for 2019 and similar hike is on the slate for 2020. Beyond that time frame, the company is forecasting annual increases in distributable cash flow of at least 5%, so distribution growth should continue at a steady clip.

The stock currently trades for $49 per share and provides a yield of 6%. Once sentiment improves for the pipeline sector, the stock could head back toward its 2015 high around $65.

The bottom line

BCE and Enbridge pay reliable and growing dividends that provide above-average yields. The stocks are not as cheap as they were last year but should still be attractive picks for a buy-and-hold TFSA income portfolio.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Walker owns shares of BCE and Enbridge. Enbridge is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

Specialty Brands faces higher raw materials costs.
Dividend Stocks

What’s Next for Premium Brands Stock?

Shares of the specialty food production and distribution company have fallen about 25% since last October.

Read more »

Double exposure of a businessman and stairs - Business Success Concept
Dividend Stocks

2 Interesting Buys in Any Market

Here are two intriguing buys in any market climate that offer defensive appeal as well as growth and income earning…

Read more »

IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT
Dividend Stocks

TFSA Investors: 3 TSX Stocks for Tax-Free Passive Income

These Canadian corporations have strong visibility over future earnings and dividend payouts.

Read more »

Simple life style relaxation with Asian working business woman healthy lifestyle take it easy resting in comfort hotel or home living room having free time with peace of mind and self health balance
Dividend Stocks

Lazy Landlords: 3 Cheap Canadian REITs to Buy in May 2022

You can become a passive landlord today by investing in Canadian REITs. Here are three cheap REITs to consider this…

Read more »

Target. Stand out from the crowd
Dividend Stocks

4 High-Yield TSX Stocks to Buy Ahead of Their Ex-Dividend Dates

If you have some cash lying idle, consider these high-yielding TSX stocks.

Read more »

growing plant shoots on stacked coins
Dividend Stocks

Passive Income: 3 TSX Stocks With Rapidly Growing Dividends

Worried about inflation? Here are three passive-income stocks to buy that pay rapidly growing dividends.

Read more »

Family relationship with bond and care
Dividend Stocks

Retirees: 4 Safe Stocks to Buy for Decent Passive Income

Retirees can offset the impact of runaway inflation by buying safe dividend stocks to create more cash flows.

Read more »

Canadian energy stocks are rising with oil prices
Dividend Stocks

3 Canadian Energy Stocks to Buy for Reliable Passive Income

Canadian energy stocks are gushing cash. Here's three top stocks that are perfect buys for reliable passive income.

Read more »