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

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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.

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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.

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