Retirees and other investors seeking steady passive income are searching for top TSX dividend-growth stocks to add to their self-directed Tax-Free Savings Account (TFSA) portfolios. A number of great Canadian dividend stocks now trade at discounted prices.
Fortis
Fortis (TSX: FTS) owns and operates $66 billion in utility assets in Canada, the United States, and the Caribbean. The businesses include power-generation facilities, electric transmission networks, and natural gas distribution utilities.
Fortis trades near $53.50 per share at the time of writing. Bargain hunters moved back into the stock in recent days, but FTS stock is still down about 10% over the past 12 months.
The pullback is largely due to the rise in interest rates in Canada and the United States. Fortis uses debt to fund part of its growth program, so higher borrowing costs can eat into profits.
Fortis has a $25 billion capital initiative on the go that will boost the rate base considerably through 2028. Management expects the resulting increase in cash flow to support planned annual dividend increases of at least 4% over the coming five years, even with the impact of increased debt costs.
Fortis raised the payout in each of the past 50 years. Investors who buy the stock at the current level can get a 4.4% dividend yield.
Emera
Emera (TSX: EMA) is a Canadian utility company with $39 billion in assets primarily located in eastern Canada and Florida. It also has smaller operations in three Caribbean countries. The regulated businesses include power generation, natural gas transmission and distribution, and electricity transmission and distribution.
Emera has a capital program in place that is expected to boost the rate base by 7-8% per year over the next three years. This should support planned annual dividend increases of 4-5%.
Emera trades near $46.50 at the time of writing. That’s down nearly 20% over the past 12 months. Higher interest rates and unfavourable weather had an impact on profits last year, but the drop in the share price is probably overdone.
Investors who buy EMA stock at the current level can get a 6.15% dividend yield.
Royal Bank of Canada
Royal Bank (TSX: RY) is the largest company on the TSX, with a current market capitalization of $191 billion. The banking giant remains very profitable in these uncertain economic times. Royal Bank generated adjusted net income of $16.1 billion in fiscal 2023, up slightly from the previous year.
The recently completed $13.5 billion acquisition of HSBC Canada adds a portfolio of wealthy clients and should provide a boost to revenue and earnings in the Canadian retail banking operations. Investors could see a generous dividend increase in 2024 as a result.
Royal Bank trades near $136 per share at the time of writing. The stock is up more than 20% over the past six months, but should still be on your radar for a dividend-growth portfolio. RY stock currently provides a 4% dividend yield.
The bottom line on top dividend stocks
Fortis, Emera, and Royal Bank are all expected to boost their dividends in 2024. If you have some cash to put to work in a portfolio targeting passive income and growing dividends, these stocks deserve to be on your radar.
