Canadian retirees are looking for ways to generate reliable and growing passive income from their savings. One popular investing strategy involves owning a basket of top TSX dividend stocks inside a Tax-Free Savings Account (TFSA).
Fortis (TSX:FTS) increased its dividend in each of the past 49 years. This is a great track record and investors should see the streak continue.
Fortis is working through a $22.3 billion capital program that is expected to increase the rate base by about 6% annually over five years. The resulting boost to revenue and cash flow should support planned dividend increases of at least 4% per year through 2027.
Fortis gets 99% of its revenue from rate-regulated businesses, including power-generation facilities, electricity transmission networks, and natural gas distribution utilities. These revenue streams tend to be predictable and reliable, which is good for investors who worry about a potential recession in the next 12-18 months.
At the time of writing, Fortis trades near $56 per share. This is down from the 2022 high around $65, so investors have a chance to buy the stock on a dip.
At the current share price, investors can get a 4% dividend yield. That’s below the best Guaranteed Investment Certificate (GIC) rates right now, but the steady dividend growth and the stock’s long-term upward trend make Fortis an attractive pick.
BCE (TSX:BCE) might be oversold today after the pullback during the past year. Investors can buy BCE for close to $59.50 at the time of writing compared to more than $70 in April 2022. The current dividend yield is 6.5%.
BCE typically increases the dividend by about 5% annually. The company is facing some headwinds in 2023, with soaring interest rates driving up debt expenses. Weaker ad revenue in the media group is also putting some pressure on cash flow.
That being said, BCE still expects 2023 revenue and free cash flow to top the 2022 levels, supported by strength in the core mobile and internet subscription businesses. As such, another decent dividend increase should be on the way for next year.
Enbridge (TSX:ENB) also looks oversold today. Investors can buy ENB stock for close to $48 compared to $59 in June 2022. At the current price, the stock provides a 7.3% dividend yield.
Enbridge has a $17 billion capital program on the go that should drive revenue higher in the next few years as new assets get put into service. In addition, the company has the financial firepower to make strategic acquisitions to deliver additional revenue growth. Management expects adjusted earnings and distributable cash flow to rise at a steady pace in the 3-5% range. This should support continued annual dividend increases.
Enbridge raised the dividend in each of the past 28 years.
The bottom line on top dividend stocks for retirees
Fortis, BCE, and Enbridge pay attractive dividends that should continue to grow. If you have some cash to put to work in a diversified TFSA focused on passive income, these stocks deserve to be on your radar.