The equity markets have turned volatile over the last few weeks amid concerns over the Federal Reserve of the United States continuing with its monetary tightening initiatives. The central bank is seeking to tame inflation as the economy grows at a higher rate than expected. Amid the volatility, one should consider investing in quality dividend stocks. Along with a stable passive income, these companies can strengthen your portfolio. Also, you can benefit from capital appreciation.
Meanwhile, if you have not maxed out your TFSA (tax-free savings account) contribution room of $6,500 for this year, you can make these investments through your TFSA, thus earning tax-free returns.
Here are two high-yield dividend stocks that I am bullish on right now.
Enbridge
Enbridge (TSX:ENB) is an energy infrastructure company involved in North America’s oil and natural gas transportation. Besides, it also stores and distributes natural gas while expanding its presence in the growing renewable energy space. With the company generating around 98% of its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) from regulated assets and take-or-pay contracts, its cash flows are stable irrespective of the market conditions. Further, around 80% of its adjusted EBITDA is inflation-indexed, thus lowering the impact of rising prices.
Supported by its stable cash flows, the midstream energy company has raised its dividends at an annualized rate of 10% for the previous 28 years. Further, the company is working on acquiring three natural gas utility assets in the United States for $19 billion. These acquisitions could double the company’s natural gas utility business while contributing 22% to the company’s adjusted EBITDA. Meanwhile, the company’s management expects to complete these acquisitions next year.
With these acquisitions increasing the cash flows from utility businesses, the company’s risks could further decline while creating long-term value for its investors. Also, the company’s $19 billion secured capital program could continue to drive its financials in the coming years. However, amid the fear that these acquisitions could substantially increase its debt levels, the company has been under pressure, losing around 12% of its stock value this year. Amid the correction, its NTM price-to-earnings multiple has declined to 15.8 while increasing its forward dividend yield to 8.06%. Considering all these initiatives, Enbridge would be an excellent dividend stock to have in your TFSA.
BCE
Telecommunication companies are excellent defensive bets in this digitally connected world. Besides, these companies earn substantial revenue from recurring sources, thus enjoying healthy cash flows. So, I have selected BCE (TSX:BCE) as my second pick. The company has aggressively invested over the previous three years, expanding its 5G and broadband infrastructure. Through these investments, the company hopes to provide 5G service to 85% and 5G+ to 46% of the country’s population by the end of this year. Further, the company’s management hopes to add 650,000 fibre connections this year.
These growth prospects could continue to expand its customer base and drive its financials in the coming years. So, BCE, which has raised its dividends uninterruptedly for the previous 15 years, could continue its dividend growth. With a quarterly dividend of $0.9675/share, its forward yield is at a juicy 7.51%. Also, amid the recent sell-off, the company trades at an attractive NTM (next 12 months) price-to-earnings multiple of 16.1, making it an attractive buy.
