3 Great Dividend-Growth Stocks to Buy for TFSA Passive Income

These stocks still look cheap and have long track records of dividend growth.

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Interest rates might have already peaked and that means the rout in the share prices of top TSX dividend stocks could finally be finished. Investors are now wondering which Canadian high-yield dividend stocks are still undervalued and good to buy for a self-directed Tax-Free Savings Account (TFSA) focused on passive income.

Telus

Telus (TSX:T) trades for close to $24.50 at the time of writing. That’s up from a low of around $21 in early October but still way off the $34 the stock hit in 2022.

The decline is primarily due to rising interest rates. Telus uses debt to cover part of its funding for network upgrades. As borrowing costs increase, there is an impact on profits and a potential reduction in cash available for distributions. Telus has also taken a hit after it cut 6,000 jobs as part of a plan to streamline operations and adjust to weaker revenue coming from the Telus International subsidiary.

The overall business, however, continues to perform well, supported by the core mobile and internet subscription services.

Telus has increased the dividend annually for more than 20 years. At the current share price, the stock provides a 6% dividend yield.

Enbridge

Enbridge (TSX:ENB) continues to grow through acquisitions and organic projects. The company recently announced a US$14 billion deal to buy three American natural gas utilities. These businesses provide reliable rate-regulated revenue and cash flow.

In the past few years, Enbridge has also invested in oil and natural gas export facilities and a developer of solar and wind projects. The moves help diversify the overall revenue stream and complement the core oil and natural gas transmission networks.

Enbridge just announced a 3.1% dividend increase for 2024. This is the 29th consecutive year the company has raised the payout. At the current share price near $47.50, Enbridge provides a 7.7% dividend yield.

Fortis

Fortis (TSX:FTS) only has a dividend yield of 4.3% today, but investors should see the return on the initial investment rise steadily in the coming years. Fortis intends to increase the dividend by at least 4% per year through 2028. The board raised the distribution in each of the past 50 years.

Growth will come from the $25 billion capital program. Fortis owns and operates utilities in Canada, the United States, and the Caribbean. The assets include rate-regulated power stations, electric transmission networks, and natural gas utilities.

Fortis trades near $54.50 at the time of writing compared to $65 at the high point last year.

The bottom line on top stocks for passive income

Telus, Enbridge, and Fortis 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 look cheap today and deserve to be on your radar.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool recommends Enbridge, Fortis, TELUS, and Telus International. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker owns shares of Enbridge and Telus.

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