New retirees and those planning to create their own self-directed TFSA pensions are searching for top dividend stocks that will provide a reliable and growing stream of tax-free earnings.
BCE
BCE (TSX: BCE)(NYSE: BCE) is one of those stocks that income investors can simply buy for a dividend portfolio and forget for decades.
The company enjoys a wide competitive moat in the Canadian communications sector and has the financial clout to defend its position through investments in fibre optic lines that run right to the premises of the customer. BCE is also spending billions of dollars to build its 5G network that will be the foundation for a variety of new revenue sources in the coming years.
Despite the big capital budget, BCE still generates significant free cash flow to cover its generous dividend and has the flexibility to raise prices on its services whenever it needs extra cash.
The stock is up about 21% in the past 12 months but still looks reasonable at the current price near $66 per share. Revenue from roaming fees should increase in 2022, and the rebound in the media business is expected to continue this year.
Investors who buy the stock at the current price can get a 5.3% dividend yield.
TC Energy
TC Energy (TSX: TRP)(NYSE: TRP) garnered a lot of negative attention during its multi-year effort to get the Keystone XL pipeline built. In the end, management had to scrap the oil pipeline project, but investors are now happy the ordeal is in the rearview mirror, and TC Energy is focused on other initiatives.
TC Energy still has a $22 billion capital program on the go with most of the investments focused on the natural gas and power-generation segments of its business. Oil pipelines are still a relatively small part of the overall mix, but the natural gas opportunities look attractive, as North American producers see opportunities to supply high-priced international liquified natural gas (LNG) markets.
TC Energy has more than 90,000 km of natural gas infrastructure and vast gas storage facilities in Canada, the United States, and the Caribbean. The company’s Coastal GasLink project will connect natural gas producers in northeastern British Columbia to a new LNG site on the BC coast. The assets TC Energy picked up when it acquired Houston-based Columbia Pipeline Group a few years ago gave the company strategic pipeline infrastructure that runs from key U.S. gas plays to the Gulf Coast.
The board intends to increase the dividend by 3-5% per year over the medium term. Investors who buy TRP stock at the current price near $64.50 can pick up a 5.4% dividend yield.
The bottom line on top dividend stock to buy now for TFSA passive income
BCE and TC Energy are leaders in their respective industries and pay generous dividends that should continue to grow at a steady pace and offer above-average yields.
If you have some cash to put to work in a TFSA focused on generating passive income as a complement to your OAS, CPP, and company pensions, these stocks deserve to be on your radar.
