TFSA Investors: 3 Canadian Dividend Stocks for a Growing Passive Income

Investors eyeing a tax-free passive-income stream could consider buying these stocks right now.

| More on:
grow dividends

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

The Tax-Free Savings Account (TFSA) contribution limit is $6,000 for 2021. Meanwhile, for those who haven’t contributed to TFSA before, the total cumulative limit stands at $75,500. 

An investment of $75,500 through your TFSA in top-quality dividend stocks could fetch a tax-free passive income each month, which would continue to grow with you. Take Enbridge (TSX:ENB)(NYSE:ENB) stock, for instance. Enbridge is currently yielding about 8.2%, implying a $75,500 investment in its stock could generate a dividend income of $6,116/year or $510/month.     

While Enbridge remains a top stock for income investors, we’ll focus on three more such high-quality dividend stocks that could continue to increase their dividends in 2021 and beyond.

TC Energy  

TC Energy (TSX:TRP)(NYSE:TRP) is a top stock that has consistently raised its dividends in the past two decades and could continue to do so in the coming years. Its high-quality and diversified asset base generates resilient and growing cash flows that drive its dividends. 

The energy infrastructure company derives about 95% of its comparable EBITDA from rate-regulated assets or long-term contracts. Notably, its assets recorded a high utilization rate, despite the COVID-19 pandemic in the background. 

TC Energy’s low-risk business, regulated assets, long-term contracts, and continued investments are likely to support its earnings and cash flows over the next decade. Meanwhile, the company projects an 8-10% growth in its 2021 dividend. Moreover, it forecasts a 5-7% increase in its annual dividends post 2021. 

TC Energy pays a quarterly dividend of $0.81 a share, translating into a yield of 6.2%.

Fortis

Thanks to its rate-regulated assets and predictable cash flows, Fortis (TSX:FTS)(NYSE:FTS) has consistently boosted investors’ returns through higher dividend payments. The company’s $19.6 billion five-year capital plan is expected to increase its rate to $40.3 billion, which is likely to drive its earnings and dividends in the coming years. 

Fortis projects its dividends to increase by 6% annually through 2025 and currently pays a quarterly dividend of $0.51 a share, reflecting a yield of 3.9%.

The company’s continued investment in regulated assets is likely to support its high-quality earnings base. Meanwhile, opportunistic acquisitions, expansion of renewable power business, and cost-reduction measures are likely to drive its top and bottom line and support the uptrend in its stock. 

Emera

With its regulated portfolio of electric and natural gas utilities, Emera (TSX:EMA) is another high-quality stock for a growing passive-income stream. The company derives 95% of its earnings from the regulated utility assets. Moreover, Emera has increased its dividend at a CAGR (compound annual growth rate) of 6% since 2000. 

Emera projects its rate base to increase at a CAGR of 7.5-8.5% through 2023, which is likely to support its high-quality earnings and cash flows. Moreover, Emera expects its dividend to increase by 4-5% through 2022. 

The company’s high-quality utility and energy assets, rate base growth, and transition toward cleaner energy positions it well to deliver healthy growth in the coming years. The utility company pays a quarterly dividend of $0.64 a share, reflecting a yield of 4.7%. 

Final thoughts

The dividends of these companies are pretty safe and could continue to increase in the coming years. Investors eyeing a tax-free passive-income stream could consider buying these stocks right now.

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 Sneha Nahata has no position in any of the stocks mentioned. The Motley Fool recommends EMERA INCORPORATED and FORTIS INC.

More on Dividend Stocks

edit Person using calculator next to charts and graphs
Dividend Stocks

The 3 Best Dividend Stocks for Monthly Passive Income

These three dividend stocks are the best options for those seeking high passive income in the next few years in…

Read more »

clock time
Dividend Stocks

Got $10,000 to Invest? 1 Cheap TSX Stock to Buy Right Now

This top TSX dividend stock is finally on sale and has made some savvy buy-and-hold investors quite rich.

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

Want Monthly Passive Income? These TSX Dividend Stocks Are for You

If you want monthly passive income from TSX stocks, you have to do a little digging. I've given you a…

Read more »

ETF chart stocks
Dividend Stocks

3 International ETFs to Buy for a Diversified Portfolio

Some international markets may prove more resilient against economic downturns, and exposure to them may strengthen your portfolio during crashes…

Read more »

Payday ringed on a calendar
Dividend Stocks

TFSA Pension: 3 Canadian Dividend Stocks to Buy for Monthly Passive Income

These high-yield Canadian stocks look good to buy right now for a TFSA focused on monthly passive income.

Read more »

TIMER SAYING TIME FOR ACTION
Dividend Stocks

Need $500 Right Away? These 3 Passive-Income Stocks Have Got You Covered

I could really use an extra $500 to feed my kids, who seem to be permanently hungry. Couldn't you?

Read more »

Young adult woman walking up the stairs with sun sport background
Dividend Stocks

3 Top TSX Stocks to Begin Your Investment Journey

Given their solid business models and stable cash flows, these three TSX stocks are ideal for income-seeking investors.

Read more »

Community homes
Dividend Stocks

Housing Market Crash: How to Make a Profit 

The housing market crash is here, but you can still earn dividends with Brookfield Infrastructure Partners (TSX:BIP.UN)(NYSE:BIP).

Read more »