Canadian pensioners are searching for top TSX dividend stocks to add to their self-directed Tax-Free Savings Account (TFSA) portfolios focused on generating steady and growing passive income. The Bank of Canada’s steep rate hikes designed to reduce inflation by cooling off the economy could trigger a recession in 2023 or 2024. As such, it makes sense to put new money to work in dividend stocks that should hold up well during an economic downturn.
BCE
BCE (TSX: BCE) is a giant in the Canadian communications sector with a current market capitalization of close to $59 billion. The stock gave up some gains over the past 12 months, falling from the 2022 high around $74 to $57 last fall. Since then, the trend has been a bit choppy, but the stock is clawing its way back.
Bargain hunters might be sensing that the Bank of Canada is done raising interest rates. This should put a ceiling on the negative impact on BCE’s borrowing costs. The company uses debt to fund a portion of the capital program and has indicated that rising debt costs will put a pinch on profits in 2023.
BCE continues to build out its 5G mobile network while also running fibre-optic lines to the premises of its customers. These programs set the business up for revenue growth in the coming years and should help BCE protect its competitive position in the market.
BCE expects revenue and free cash flow to be higher in 2023 than in 2022, even with the economic headwinds. That should support another decent dividend increase for 2024. BCE raised the distribution by at least 5% in each of the past 15 years.
Investors who buy the stock at the current price can get a 6% dividend yield.
Enbridge
Enbridge (TSX: ENB) has increased its dividend for 28 consecutive years, and investors should see the trend continue, even if the size of the increase is smaller than it used to be when Enbridge was building out its massive oil pipeline network.
The larger a company gets, the harder it is to maintain the previous pace of growth. At a current market capitalization of roughly $108 billion, Enbridge is an energy infrastructure behemoth. The days of getting large, new pipeline projects approved and built are likely over as a way to drive growth. As a result, Enbridge is shifting its strategy to take advantage of its expertise to capitalize on emerging market opportunities.
Enbridge bought an oil export terminal in Texas in 2021 for US$3 billion. The company is also a partner on the Woodfibre liquified natural gas (LNG) terminal being built in British Columbia. That facility is expected to go into service in 2027 and will ship LNG to foreign buyers. International demand for Canadian and U.S. energy is on the rise and expected to be strong in the coming years.
Enbridge has a diversified revenue steam coming from the existing liquids and natural gas pipeline networks, natural gas utilities, and renewable energy assets. The current $18 billion capital program should drive ongoing revenue growth. Domestic fuel demand is expected to remain strong, even if the economy slips into a recession.
ENB stock trades near $53 per share at the time of writing compared to more than $59 last June. Investors can buy the dip and pick up a 6.7% dividend yield.
The bottom line on top stocks for passive income
BCE and Enbridge pay attractive dividends that should continue to grow. If you have some cash to put to work in a TFSA focused on passive income, these stocks deserve to be on your radar.
