TFSA Passive Income: 2 Top Canadian Dividend Stocks for Retirees

These stocks offer great yields and have increased their dividends for decades.

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The pullback in the share prices of some top TSX dividend stocks is giving Canadian seniors a chance to get attractive yields right now for self-directed Tax-Free Savings Account (TFSA) portfolios focused on generating passive income.

Telus

Telus (TSX:T) is a major player in the Canadian communications industry with wireless and wireline network infrastructure that delivers essential mobile and internet services to businesses and households across the country.

The stock trades near $22 per share at the time of writing compared to more than $34 at the high point in 2022.

Most of the slide is due to a jump in interest rates. The Bank of Canada is trying to get inflation back down to its 2% target by increasing borrowing costs for businesses and homeowners. Higher debt expenses bite into cash that would otherwise be available to invest in business expansion or spent on discretionary goods and services. The central bank hopes higher rates cool off the economy enough to bring the jobs market back into balance to ease upward pressure on wages and prices for products and services.

Telus uses debt to fund part of its growth initiatives. The higher borrowing costs reduce profits and can cut into cash flow that could be used for distributions. Economists expect the Bank of Canada to start cutting interest rates at some point this year. That should be a positive for Telus and its investors.

Telus generated solid financial results in 2023, despite some challenges at its Telus International subsidiary that provides multi-lingual call centre and IT services to global firms. The division accounts for a relatively small part of overall earnings at Telus, so the drop in the share price of the parent company is probably overdone.

Investors who buy Telus at the current level can get a 6.8% dividend yield. The board has increased the payout annually for more than 20 years.

Enbridge

Enbridge (TSX:ENB) is a giant in the North American energy infrastructure sector. The company’s oil pipelines move 30% of the oil produced in Canada and the United States, and the natural gas transmission network transports 20% of the natural gas used by Americans. In addition, Enbridge is set to become the largest natural gas utility in Canada and the United States as it wraps up a US$14 billion purchase of three American natural gas utilities. The company has also expanded its export capabilities in recent years and is growing its renewable energy group.

The $25 billion capital program, along with contributions from acquisitions, should drive ongoing cash flow growth to support dividend increases. Enbridge has given investors a dividend raise in each of the past 29 years.

At the time of writing, ENB stock trades near $47.50 compared to a high of around $59 in 2022, so there is decent upside potential. The current dividend yield is 7.7%.

The bottom line on top stocks for passive income

Telus and Enbridge pay attractive dividends that should continue to grow. If you have some cash to put to work, 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, TELUS, and Telus International. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker owns shares of Telus and Enbridge.

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