The higher interest rate environment could keep the volatility elevated in the stock market. However, investors can still earn steady passive income from the top Canadian dividend stocks. It’s worth highlighting here that top dividend-paying Canadian corporations have been paying and increasing their dividend, regardless of the market conditions, which makes them a reliable investment in all market conditions.
Furthermore, investors who leverage their TFSA (Tax-Free Savings Account) to invest in these high-quality dividend stocks earn a steady tax-free passive income.
But before we discuss top Canadian stocks to earn passive tax-free passive income, let’s be clear that dividends are not guaranteed. Even the safest stocks can cut their payouts. Thus, investors should focus on diversifying their investments and not allocate all their money to one or two stocks.
With this backdrop, let’s look at stocks that can help you make reliable passive income.
Image source: Getty Images
Fortis
Regulated electric utility company Fortis (TSX: FTS) is a top stock for earnings tax-free passive income. Its low-risk business remains relatively immune to macro headwinds and generates predictable cash flows. Thanks to its regulated asset base and solid cash flows, Fortis has increased its dividend for 49 consecutive years.
Besides its solid dividend payments, Fortis stock is less volatile, which makes it a solid defensive play. Fortis is confident about enhancing its shareholders’ returns through higher dividend payouts. It expects to grow its dividend by an average annualized rate of 4-6% through 2027. Its payouts are backed by the growing rate base. Fortis expects to increase its rate base at a CAGR (compound annual growth rate) of 6% in the next five years, thanks to its $22.3 billion capital plan.
The visibility over its future dividend payouts and growing rate base make it a solid passive-income stock.
Enbridge
Like Fortis, Enbridge (TSX: ENB) is another top Canadian stock to rely on for steady passive income. This energy company offers the infrastructure required to transport oil and natural gas. Further, it is expanding its renewable power-generation capabilities, which positions it well to capitalize on the energy transition opportunities.
Overall, its diversified revenue sources, high asset utilization rate, and a solid mix of conventional and renewable assets help it to enhance its shareholders’ returns through higher dividend payments. Enbridge has increased its dividend at a CAGR of 10% in the past 28 years.
Enbridge is poised to benefit from multi-billion-dollar secured capital projects, new assets placed into service, and revenue escalators. Further, its payout ratio of 60-70% is sustainable in the long term.
TC Energy
TC Energy (TSX: TRP) is the final stock on this list. This energy infrastructure company has increased its dividend at a CAGR of 7% in the past 23 consecutive years. Its regulated and contracted assets generate solid cash flows that support its payouts.
With most of its earnings coming from regulated and contracted assets, TC Energy is well positioned to deliver higher shareholders’ returns. Also, its $34 billion secured capital program and energy transition opportunities bode well for growth. Thanks to its resilient business model, TC Energy projects a 3-5% increase in its future dividends.
Bottom line
These companies have been paying and growing their dividends for years. Moreover, their payouts are well protected and sustainable in the long term. Also, all these companies offer attractive yields, making them excellent investments for generating passive income.
| Company | Recent Price | Number of Shares | Dividend | Total Payout | Frequency |
| Fortis | $52.29 | 181 | $0.565 | $102 | Quarterly |
| Enbridge | $51.25 | 195 | $0.887 | $173 | Quarterly |
| TC Energy | $54.89 | 182 | $0.93 | $169 | Quarterly |
The table shows that a $10K investment in each stock through the TFSA could generate about $445 in tax-free passive income every quarter, or about $148 per month.
