TFSA Investors: The Best TSX Energy Stocks for Fast-Growing Passive Income

This TSX energy stock’s rapidly growing dividends can act as a reliable source of passive income for TFSA investors.

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If you want to realize the true potential of your TFSA (Tax-Free Savings Account), you must consider investing in some quality dividend stocks. By doing so, you can expect to get outstanding capital gains on your investments with the share prices appreciation in the long term, and it can also let you create a reliable source of fast-growing passive income at the same time.

Let’s take a closer look at one of the best TSX energy stocks with rapidly growing dividends that you can add to your TFSA right now and hold forever.

The best energy stock (with high dividends) for TFSA

In the short term, any dividend stock can outperform the broader market and catch investors’ attention. However, it might not be easy for it to consistently outperform the market in the long run if it doesn’t have a reliable business model, diversified assets, and a strong fundamental outlook. That’s why I always recommend that TFSA investors keep a large portion of their portfolio invested in some safe large-cap stocks so that their passive-income stream remains largely stable irrespective of economic cycles.

Keeping these factors in mind, TC Energy (TSX:TRP) could be a great TSX dividend stock to buy now to hold for the long term. This Calgary-headquartered firm primarily focuses on the transportation and storage of energy products and has a market cap of $54.3 billion. After sliding by 8.2% in 2022, TRP stock currently trades at $53.78 per share without any major change on a year-to-date basis.

Key positive fundamental factors

TC Energy has more than seven decades of experience in serving the North American energy sector with its high-quality assets, which are currently worth about $114 billion. Besides its interests in power-generation facilities with around 4,300 megawatts capacity, its quality assets include liquids pipelines and 58,200 miles of natural gas pipelines.

The underlying strength of TC Energy’s fundamentals also reflects in its long-term financial growth trends. Notably, the energy company’s total revenue in the five years between 2017 and 2022 increased by 11% to $15 billion. To add optimism, its adjusted earnings during the same five-year period jumped 39% from $3.09 per share to $4.30 per share.

Solid profitability and dividend growth

No matter how strong a stock’s revenue looks, it might not be a good business to invest in if its profitability remains weak. Notably, TC Energy’s adjusted net profit margin significantly expanded in the last five years from 20% to 28.6% with the help of stronger pricing, confirming its solid profitability growth in recent years.

Moreover, TC Energy has consistently been increasing its dividends each year since 2000. In the last five years alone, the company’s strong financial position and robust business growth have encouraged its management to raise the dividend per share by 44%. At the current market price, this TSX energy stock offers an attractive 6.9% annual dividend yield and distributes its dividend payouts every quarter.

Given all these positive factors, recent declines in TRP stock could be an opportunity for TFSA investors to buy an amazing dividend stock at a bargain to earn tax-free passive income.

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 has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.

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