While inflation has moderated a bit from the peak, it remains high. Thus, interest rates could continue to rise, posing challenges for TFSA (Tax-Free Savings Account) investors. Nonetheless, investors can still earn a steady income through top Canadian dividend stocks.
It’s important to highlight that TSX has several dividend stocks that have been paying and growing their dividends for decades. However, dividends are not guaranteed, and a company could pause or cut its payouts. Thus, TFSA investors should focus on diversifying their portfolios and not depend on one or two stocks.
Against this backdrop, I’ll discuss three large-cap Canadian stocks with solid dividend payment histories, well-protected payouts, and a growing earnings base. Due to their resilient business model, these stocks are a dependable investment in all market conditions. Let’s begin.
Fortis
Speaking of dividends, Canadian utility stocks look compelling investments due to their rate-regulated business model. Within the utility sector, Fortis (TSX:FTS) is my top pick, given its stellar dividend-growth history, resilient business model, and visibility over its future payments.
Fortis operates a low-risk, regulated electric business that remains mostly immune to macro headwinds. Thanks to its regulated asset base, Fortis generates predictable cash flows that drive its payouts. Notably, Fortis increased its dividend for 49 years.
Its rate base is forecasted to grow at a CAGR (compound annual growth rate) of 6.2% through 2027. Thanks to the growing rate base, Fortis expects its dividend to increase by 4-6% annually during the same period.
Fortis’s defensive business model, decent dividend-growth forecast, and a $22.3 billion capital plan position it well to enhance its shareholders’ returns. Meanwhile, TFSA investors can earn a tax-free yield of 4.2% by investing in FTS stock near the current levels.
Enbridge
Like Fortis, Enbridge (TSX:ENB) is another popular stock for TFSA investors to generate reliable passive income. Enbridge, which transports hydrocarbons and has growing renewable power-generation capabilities, has increased its dividend for 28 consecutive years.
Its robust dividend payments are supported by its diversified revenue stream, inflation-protected EBITDA (earnings before interest, taxes, depreciation, and amortization), and growing distributable cash flow per share. Furthermore, its investments in growth projects and revenue escalators bode well for future payouts.
This energy company’s continued investment in conventional and renewable assets, a well-covered payout ratio of 60-70%, ability to grow the dividend, and a lucrative dividend yield of 6.7% make it one of the best TSX stocks to buy this year.
TC Energy
My final pick is TC Energy (TSX:TRP). It provides energy infrastructure assets that transport natural gas and other hydrocarbons. Thanks to its highly regulated and contracted asset base, TC Energy has consistently increased its dividend payments for years. To be precise, TC Energy increased its dividend for 23 consecutive years at a CAGR of 7%.
Notably, about 90% of its income comes from regulated and contracted assets, implying its payouts are well covered. Moreover, its $34 billion secured growth projects will drive its high-quality asset base and support future earnings and dividend growth.
TC Energy offers a dividend yield of 6.7%. Further, it expects a 3-5% annual increase in dividend in the coming years, making it an attractive investment for your TFSA portfolio.
