Canadian pensioners are searching for top TSX dividend stocks to add to Tax-Free Savings Account (TFSA) portfolios targeting passive income and total returns. Enbridge (TSX:ENB) and TD Bank (TSX:TD) are popular picks among dividend investors, and the share prices are now down to interesting levels.
Enbridge is benefitting from the rebound in domestic demand for fuel, as airlines ramp up capacity and commuters head back to the office. Pandemic lockdowns forced air carriers to cut thousands of routes while office workers stayed home for two years.
On the global front, the war in Ukraine is driving new international demand for North American oil and natural gas, as countries seek out secure long-term supplies.
Despite the positive trends at home and abroad in the energy market, Enbridge stock remains out of favour near $52.50 per share at the time of writing compared to $59.50 last June.
Enbridge’s oil pipelines move about 30% of the oil produced in Canada and the United States. The natural gas transmission network carries about 20% of the natural gas used by American homes and businesses. As such, the energy infrastructure network serves a strategically important role in making sure the economies of the two countries operate smoothly.
Enbridge’s oil terminal in Texas ships the commodity to overseas buyers. Management is also expanding the liquified natural gas (LNG) operations with a stake in the new Woodfibre LNG plant being built in British Columbia and construction of new infrastructure to carry natural gas to LNG facilities.
Enbridge raised its dividend by roughly 3% for 2023, extending the annual dividend-growth streak to 28 years. Investors who buy at the current level can get a dividend yield of 6.75%. The $18 billion capital program should support ongoing dividend increases.
TD trades near $80 per share right now compared to $93 in February. Big dips in the share price have traditionally proven to be good entry points for buy-and-hold investors. The recent pullback has occurred as part of the broader rout in bank stocks caused by bank failures in the United States and Europe.
Investors are concerned that more surprises could be on the way as the full impact of aggressive rate hikes by central banks starts to become evident. TD is in the process of trying to close its US$13.4 billion purchase of First Horizon, a U.S. regional bank. Uncertainty around the deal might be putting added pressure on TD’s share price.
TD remains a very profitable business and is well capitalized. Ongoing volatility in the bank sector should be expected, but TD is starting to look cheap at just 9.7 times trailing 12-month earnings.
The bank has a compound annual dividend growth rate of roughly 10% over the past 25 years, so patient investors tend to get paid well to ride out turbulence. At the time of writing, the stock provides a 4.8% dividend yield.
Is one a better pick for pensioners?
Retirees who are specifically interested in reliable high-yield stocks for portfolios focused on passive income might want to make Enbridge the first choice today. The rebound in fuel demand is expected to continue, and Enbridge’s distribution should move higher in the coming years.
TD might be the way to go for retirees who can handle some near-term volatility and are looking to buy cheap stocks that offer a combination of attractive yields and a shot at some decent potential capital gains.
I would probably split a new investment between the two stocks today.