Canadians are using their Tax-Free Savings Accounts (TFSAs) to build portfolios of investments that can generate reliable and growing passive income. The market pullback over the past year is giving investors a chance to buy top TSX dividend stocks at cheap prices.
Buying dips takes courage, but yields are higher when stocks are cheap. Getting in on great stocks when they are out of favour can have a big impact on total returns over the long haul.
Enbridge
Enbridge (TSX:ENB) raised its dividend annually for the past 28 years, and investors should see the trend continue. The company is working on a $17 billion capital program and has the financial firepower to make tuck-in acquisitions to drive additional growth.
Oil and natural gas demand is expected to grow in the coming years, despite the global transition to renewable energy. Enbridge is actually positioned well to benefit from both commodity demand and the expansion of wind and solar projects.
The company moves 30% of the oil produced in Canada and the United States and operates an oil export terminal in Texas. Enbridge is also a partner in the Woodfibre liquified natural gas (LNG) export facility being built in British Columbia. In the domestic gas markets, Enbridge’s natural gas utilities distribute the fuel to millions of Canadian customers. The natural gas pipeline infrastructure carries 20% of the natural gas used in the United States.
On the renewables side, Enbridge is expanding its solar and wind operations in both North America and Europe.
Enbridge stock trades below $48 at the time of writing compared to more than $59 at the high point last year.
Investors who buy the dip can get a 7.4% dividend yield from ENB stock.
Fortis
Fortis (TSX:FTS) increased its dividend in each of the past 49 years. The company’s $22.3 billion capital program is expected to boost the rate base by an average of 6% per year over five years. This should drive adequate revenue and cash flow growth to support the planned dividend increases of 4-6% annually through 2027.
Fortis gets nearly all of its revenue from rate-regulated businesses located in Canada, the United States and the Caribbean. The assets generate power, move electricity, and deliver natural gas. These are essential services that are required, regardless of the state of the economy.
The dividend yield is only about 4.2%, but the dividend growth and the long-term total returns make Fortis a top dividend pick. At the time of writing, FTS stock trades for less than $54 per share compared to more than $64 last year.
Buying Fortis on big dips has historically proven to be a profitable move for patient investors.
The bottom line on top stocks for passive income
Enbridge and Fortis are good examples of top TSX dividend stocks paying attractive dividends that continue to grow. If you have some cash to put to work in a self-directed TFSA focused on passive income, these stocks deserve to be on your radar.
