TFSA Investors: 2 Top Canadian Dividend Stocks to Buy Now

TFSA income investors can still find top Canadian dividend stocks that offer reliable payouts and above-average yields.

| More on:
TFSA and coins

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

Pensioners and other income investors are constantly searching for top dividend stocks to buy for their TFSA portfolios. The market rally in the past year erased most of the deals, but some leading dividend payers still look undervalued.

Telus

Telus (TSX:T)(NYSE:TU) is a Canadian communications firm delivering mobile, internet, and TV services to retail and business clients across the country. The company also has other investments, including its Telus Health division. This group provides digital solutions and products to doctors, hospitals, and insurance firms. Telus Health was already a leader in the space before the pandemic and has become much better known over the past year.

The recent reversal by the CRTC on cuts to wholesale internet pricing should help Telus plan for future investments, including the rollout of its 5G network. Telus already raised significant cash this year through the IPO of the international business and the sale of $1.3 billion in new stock.

Telus has a long track record of dividend growth, and that should continue at a steady pace and potentially ramp up after the heavy capital outlays expected in the next two or three years. This stock appears attractive right now when you consider the price Rogers is willing to pay to buy Shaw.

Investors who buy Telus stock today can pick up a solid 4.6% yield. The share price tends to hold up well when the broader market takes a hit, so there is some defensive value in owning the stock in a balanced portfolio.

Enbridge

Enbridge (TSX:ENB) (NYSE:ENB) transports roughly 25% of the oil produced in Canada and the United States. The energy infrastructure giant also moves 20% of the natural gas consumed in the U.S., has natural gas utility businesses, and operates a growing renewable energy group.

The energy sector took a big hit in 2020, but is starting to rebound strongly. This is occurring even as the industry remains out of favour due to the focus on climate change and new ESG investing mandates.

One knock against Enbridge is the fact that getting new pipelines built is difficult. This limits organic growth opportunities. At the same time, the existing infrastructure the company owns becomes more valuable. In addition, Enbridge is large enough to make strategic acquisitions to drive revenue expansion.

Enbridge’s gas transmission and renewable energy operations helped offset the downturn on the oil pipeline side of the business last year, and that allowed the company to raise the dividend. With fuel demand expected to rebound through the back half of 2021, Enbridge’s oil pipelines should return to capacity levels. Oil producers are already ramping up oil-by-rail shipments due to limited pipeline space.

Enbridge’s stock price appears cheap right now, and investors can pick up a 7% dividend yield. Even if the share price stays at the current level, the return is attractive for income investors. Dividend growth should be in line with expected increases in distributable cash flow of about 5% per year. As more money moves back into energy names, Enbridge’s share price could pick up a new tailwind.

In fact, it wouldn’t be a surprise to see the stock retest the pre-pandemic price of $56 over the next two years. That’s nearly 20% upside from the share price at the time of writing.

The bottom line

In a world where GICs pay less than the rate of inflation, it is good to know that TFSA income investors can still find high-yield stocks at reasonable prices. If you have some cash to put to work in your TFSA dividend portfolio, Telus and Enbridge deserve to be on your radar.

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.

The Motley Fool owns shares of and recommends Enbridge. The Motley Fool recommends ROGERS COMMUNICATIONS INC. CL B NV and TELUS CORPORATION. Fool contributor Andrew Walker owns shares of Telus and Enbridge.

More on Dividend Stocks

Happy family father of mother and child daughter launch a kite on nature at sunset
Dividend Stocks

Parents: Here’s Every Credit and Benefit You Can Claim From the CRA

Parents have it hard already, so make sure the CRA is doing everything for you by dishing out payments you're…

Read more »

edit Colleagues chat over ketchup chips
Dividend Stocks

3 Canadian Dividend Stocks to Buy and Hold for Life

These dividend-paying stocks have solid earnings base to support their payouts for decades.

Read more »

A golden egg in a nest
Dividend Stocks

Create a Million-Dollar TFSA With Just $1,000

If you have a TFSA, you can easily make a million-dollar portfolio by investing on a consistent basis in this…

Read more »

Dollar symbol and Canadian flag on keyboard
Dividend Stocks

3 Canadian Stocks With Over 6% of Dividend Yield

Boost your passive income with three safe dividend stocks.

Read more »

TFSA and coins
Dividend Stocks

TFSA Pension: 2 TSX Dividend Stocks to Buy Now and Hold for Decades

These top TSX stocks pay great dividends and look cheap to buy right now for a TFSA retirement fund.

Read more »

IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT
Dividend Stocks

TFSA Dividend Income: 2 TSX Stocks to Buy on the Pullback

These TSX stocks look oversold and pay attractive dividends that continue to grow.

Read more »

oil tank at night
Dividend Stocks

1 Top TSX Energy Stocks for Summer 2022

TSX energy stocks have tanked recently, but they could enjoy a nice summer rally. Here's one top stock I'm eyeing…

Read more »

TIMER SAYING TIME FOR ACTION
Dividend Stocks

Market Correction: 2 Cheap TSX Dividend Stocks to Buy Now for a Self-Directed RRSP

These top TSX dividend stocks look cheap right now for a self-directed RRSP focused on total returns.

Read more »