TFSA Investors: 2 Stocks Ready for Dividend Hikes in 2024

These top TSX dividend-growth stocks look cheap right now.

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High interest rates and a weakening economy will put pressure on companies in 2024. As such, it makes sense for self-directed investors who seek reliable passive income inside a Tax-Free Savings Account (TFSA) to buy TSX stocks that have long histories of dividend growth supported by strong revenue streams and steady asset growth.

TC Energy

TC Energy (TSX:TRP) is a major player in the North American energy infrastructure industry, with more than 93,000 km of natural gas pipelines and 650 billion cubic feet of natural gas storage capacity located across Canada, the United States, and Mexico.

TC Energy’s share price came under pressure over the past two years, as rising interest rates drove up borrowing costs. The company uses debt to fund part of its capital program, so the jump in debt expenses can put a dent in profits. TC Energy also saw costs soar on a large project. The Coastal GasLink pipeline has now reached mechanical completion, but the price tag is expected to be about $14.5 billion, which is more than double the initial budget.

Despite these headwinds, TC Energy delivered a solid performance in 2023. Management raised guidance for 2023 and 2024 when the company held the shareholders meeting in late November last year. Investors should see roughly 8% growth in comparable earnings before interest, taxes, depreciation, and amortization (EBITDA) reported for 2023, and another gain of 5-7% is expected in 2024.

TC Energy has increased the dividend annually for more than two decades. The board intends to boost the payout by at least 3% per year over the medium term. Investors who buy TC Energy at the current level can get a 7.3% dividend yield.

Telus

Telus (TSX:T) has also delivered steady annual dividend growth for more than 20 years. The company generates growing revenue from its core mobile and internet subscription businesses. These are services required by businesses and households regardless of the state of the economy.

Telus generated 9.4% growth in full-year operating revenue in 2023, despite challenging conditions at its Telus International subsidiary. Adjusted EBITDA rose 7.6% in 2023 compared to 2022, and free cash flow jumped 38% to $1.8 billion.

In 2024, the company is targeting operating revenue growth of 2-4% and adjusted EBITDA growth of 5.5% to 7.5%. Consolidate free cash flow is expected to increase 30% to $2.3 billion this year.

The stock trades near $23.50 at the time of writing compared to more than $34 at the 2022 peak. Investors who buy the dip can get a 6.4% dividend yield from Telus.

The bottom line on top TSX dividend-growth stocks

TC Energy and Telus are good examples of top Canadian dividend-growth stocks that currently trade at discounted prices and offer attractive dividend yields. If you have some cash to put to work in a self-directed TFSA targeting passive income, these stocks 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 TELUS and Telus International. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker owns shares of Telus.

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