Retirees: 1 High-Yield Dividend Stock to Buy Now for Passive Income

Retirees can now buy top Canadian dividends stocks at cheap prices and lock in high yields for a TFSA focused on passive income.

| More on:
Increasing yield

Image source: Getty Images

Retirees and other investors seeking passive income can take advantage of the market correction to buy top TSX dividend stocks at undervalued prices. The pullback is now driving up dividend yields to attractive levels on great Canadian stocks.

Enbridge

Enbridge (TSX:ENB)(NYSE:ENB) trades for less than $54 at the time of writing compared to more than $59 in June. The pullback appears overdone given the ongoing recovery in the oil and natural gas sector and the nature of Enbridge’s revenue stream.

Enbridge operates vast oil and natural gas transmission networks that play an integral role in the smooth operation of the Canadian and U.S. economies. Businesses rely on the timely delivery of oil, natural gas, propane, jet fuel, diesel fuel, and gasoline produced by refineries. Homes need natural gas, propane, and heating oil to keep the building warm, heat water, or cook food.

Enbridge moves 30% of the oil produced in Canada and the United States and 20% of the natural gas used by Americans. In addition, Enbridge owns natural gas utilities that directly supply the fuel to millions of customers. Finally, Enbridge has a growing renewable energy business with solar, wind, and geothermal operations.

Getting new major oil pipelines approved and built is nearly impossible these days. That means the existing infrastructure should increase in value.

Opportunities

Looking ahead, Enbridge is focusing new capital investments on export opportunities and the emerging hydrogen and carbon-capture sectors. Enbridge spent US$3 billion last year on an oil export platform and related pipeline infrastructure in Texas. In Canada, Enbridge recently announced a deal to take a 30% ownership position in the $5.1 billion Woodfibre liquified natural gas (LNG) facility being built in British Columbia. The company is also investing in new natural gas pipelines to deliver the fuel to LNG sites in the United States.

Carbon capture is becoming popular as high-emitters look for solutions to meet net-zero targets. Enbridge is already working with clients in Canada to build a carbon-sequestration hub. The company is also involved in hydrogen projects. This could be a large driver of growth in the coming years. Germany just announced a “hydrogen alliance” with Canada. The goal is to produce hydrogen in eastern Canada for shipment to Germany.

Enbridge already has a hydrogen blending project in operation in Markham, Ontario. The facility injects clean hydrogen into the natural gas distribution network to lower the carbon footprint.

Dividends

Enbridge is working on a $13 billion capital program that will boost revenue and cash flow to support dividend growth. The company can also take advantage of its size to make strategic acquisitions. Enbridge raised the dividend in each of the past 27 years. The current distribution provides an annualized yield of 6.4%.

Enbridge is a good high-yield stock to buy if you like the energy sector but don’t want to take on the volatility that comes with owning the oil and natural gas producers.

The bottom line on top stocks to buy for passive income

Enbridge pays an attractive dividend that should continue to grow for years. If you have some cash to put to work in a TFSA focused on passive income this stock deserves to be on your radar. The TSX Index is home to many top dividend stocks that now look oversold.

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 recommends Enbridge. Fool contributor Andrew Walker owns shares of Enbridge.

More on Investing

A worker uses a double monitor computer screen in an office.
Bank Stocks

BMO vs. BNS: Which Bank Stock Is a Better Buy?

Let's explore whether Bank of Nova Scotia or Bank of Montreal is a better buy today seeing as they have…

Read more »

Going against the grain
Dividend Stocks

Contrarian Investors: 2 Discounted High-Yield Dividend Stocks for Passive Income

These top TSX dividend stocks now have 7% dividend yields.

Read more »

Dividend Stocks

Bank of Canada Rate Cuts: Best Stocks to Buy Right Now

These are the best stocks to buy with interest rates coming down. Don't just save money; start making it, too!

Read more »

Person holds banknotes of Canadian dollars
Retirement

TFSA: How to Earn $4,750 in Tax-Free Passive Income Per Year

This strategy can help boost passive income and reduce portfolio risk.

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Wednesday, June 19

Most TSX stocks could remain range-bound today as the U.S. stock markets remain closed for Juneteenth.

Read more »

Pile of Canadian dollar bills in various denominations
Dividend Stocks

2 of the Top Dividend Stocks in Canada

Here are two of the best buy-and-hold-forever dividend stocks in Canada you can bet on.

Read more »

calculate and analyze stock
Investing

This Is the Biggest Stock in My Personal Portfolio

Here's why I continue to buy shares of this S&P 500 index ETF whenever I can.

Read more »

Growth from coins
Investing

Got $2,000? Here Are 2 Beaten-Down Growth Stocks to Buy Right Now

Beaten-down growth stocks such as Aritzia and UiPath trade at a discount to consensus price target estimates.

Read more »