Retirees seeking passive income and other investors targeting long-term total returns have an opportunity to buy some of Canada’s top dividend-growth stocks at discounted prices for a self-directed Tax-Free Savings Account (TFSA) or a Registered Retirement Savings Plan (RRSP).
Buying stocks on a pullback takes courage, but the strategy can boost yields on savings and set the portfolio up for decent potential capital gains when the market recovers.
Enbridge
Enbridge (TSX:ENB) is a major player in the North American energy infrastructure industry, with pipelines that move 30% of the oil produced in Canada and the United States, as well as 20% of the natural gas used by Americans.
In recent years, Enbridge’s growth investments have focused on exports, utilities, and renewable energy. Enbridge purchased an oil export terminal for US$3 billion in 2021 and bought a stake in the Woodfibre liquified natural gas (LNG) export facility being built in British Columbia. The company is also expanding its solar and wind portfolio and recently announced a US$14 billion deal to purchase three natural gas utilities in the United States.
These new assets, along with the ongoing capital program, should support dividend growth in the coming years. Enbridge reported solid third-quarter (Q3) 2023 results and confirmed its financial guidance for the year.
Enbridge trades for close to $46 per share at the time of writing. The stock was as high as $59 last year.
The drop is likely overdone. Investors who buy at the current level can get a 7.7% dividend yield. Enbridge has increased the dividend annually for 28 years.
Fortis
Fortis (TSX:FTS) is a good example of a great Canadian dividend stock that investors can buy and simply sit on for decades. The board has increased the dividend in each of the past 50 years and intends to boost the payout by 4-6% annually through at least 2028.
The $25 billion capital program is expected to raise the rate base considerably over the next five years. As the new assets go into service, there should be steady revenue and cash flow growth. Fortis has other projects under consideration that could be added to the capital plan. The company also has a good track record of making strategic acquisitions to drive additional growth.
Fortis owns power generation, electric transmission, and natural gas distribution utilities in Canada, the United States, and the Caribbean. Nearly all of the revenue comes from rate-regulated assets that provide essential services needed by homes and businesses, regardless of the state of the economy.
Fortis picked up a nice tailwind in recent weeks, rising from $50 to the current price near $57 as bargain hunters started buying the dip. The stock still looks attractive and currently offers a 4% dividend yield.
The bottom line on top TSX dividend stocks
Enbridge and Fortis pay attractive dividends that should continue to grow. If you have some cash to put to work in a TFSA or RRSP, these stocks deserve to be on your radar.
