Pensioners and other investors who hold TSX dividend stocks for passive income have an opportunity to buy top Canadian dividend-growth stocks at discounted prices for a self-directed income portfolio.
TC Energy
TC Energy (TSX:TRP) is a Canadian energy infrastructure company with more than 93,000 km of natural gas pipelines and 650 billion cubic feet of natural gas storage capacity in Canada, the United States, and Mexico. The company also has investments in seven power-generation facilities that can produce enough electricity to supply four million homes. In addition, TC Energy owns oil pipelines that it intends to spin off into a separate business.
TRP stock trades near $53 at the time of writing. Investors who bought the stock around the 12-month low close to $44 are already sitting on decent gains, but more upside could be on the way through the end of next year.
The Bank of Canada recently cut interest rates and the U.S. Federal Reserve is expected to begin trimming rates before the end of this year or in early 2025. Soaring interest rates are largely to blame for the decline in TC Energy’s share price in the second half of 2022 and through much of 2023. The company built up a large debt position to complete its 670 km Coastal GasLink pipeline project that saw its budget more than double to $14.5 billion. High borrowing expenses are putting a pinch on profits.
Reduced rates will make debt cheaper and lower borrowing costs as TC Energy moves forward on the rest of its capital program. Management is also doing a good job of monetizing non-core assets to pay down the debt to make sure the business is positioned well to grow in the coming years.
TC Energy delivered solid financial results in 2023, despite the headwinds. The board raised the quarterly dividend from $0.93 to $0.96 per share for 2024. This is the 24th consecutive annual dividend increase with investors receiving a compound annual dividend growth rate of 7% over that timeframe.
Investors who buy TRP stock at the current level can get a 7.2% dividend yield.
Enbridge
Enbridge (TSX:ENB) is another pipeline giant that has a great track record of dividend growth. The company has increased the distribution annually for the past 29 years.
Enbridge is widely known for its oil pipeline business. This division remains a core asset and is strategically important for the Canadian and U.S. economies. Enbridge moves nearly a third of the oil produced in the two countries.
Investments in recent years have focused on oil exports, natural gas, and renewable energy. Enbridge bought an oil export terminal in Texas. The company’s natural gas transmission network carries 20% of the natural gas used in the United States, and the impending completion of its US$14 billion acquisition of three natural gas utilities in the U.S. will make Enbridge the largest natural gas utility operator in North America.
ENB stock trades near $49 per share at the time of writing. It was as high as $59 in 2022, so there is decent upside potential. The acquisitions and the current $25 billion capital program should boost distributable cash flow by at least 3% annually over the next few years. This should support dividend growth in the same range.
Investors who buy ENB stock right now can get a dividend yield of 7.5%.
The bottom line on top stocks for high-yield dividends
TC Energy and Enbridge are good examples of high-yield dividend stocks with long track records of dividend growth. If you have some cash to put to work, these stocks still look cheap and deserve to be on your radar.
