The pullback in the share prices of some top TSX dividend-growth stocks is giving investors a chance to buy dividend stocks that now offer attractive yields for a self-directed Tax-Free Savings Account (TFSA) focused on growing passive income.
Enbridge
Enbridge (TSX:ENB) generated adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $4.95 billion in the first quarter (Q1) of 2024 compared to $4.47 billion in the same quarter last year. Distributable cash flow (DCF) increased to $3.46 billion from $3.18 billion in Q1 2023.
The stock, however, is down more than 5% in the past month, despite the strong start to the year and guidance that shows anticipated annual DCF growth of 3% through 2026 and 5% beyond that timeframe.
Enbridge is working on a $25 billion capital program and is in the process of wrapping up its US$14 billion acquisition of three American natural gas utilities. Revenue and cash flow expansion from the new assets should support dividend increases in the coming years that are roughly in line with the growth in DCF.
Enbridge has increased the dividend for 29 consecutive years. At the current share price near $47.50, investors can get a 7.7% dividend yield.
Telus
Telus (TSX:T) trades near $21.50 at the time of writing. This is close to the 12-month low and is way off the $34 the stock reached in 2022 at the height of the post-pandemic rally.
The drop in the stock price is likely overdone given that Telus generated solid results in 2023 and 2024 should be stable. Consolidated operating revenue rose 9.4% and adjusted EBITDA increased 7.6% last year.
Management provided decent 2024 guidance. Despite the headwinds coming from high interest rates and price wars on mobile plans, Telus expects adjusted EBITDA to rise by 5.5% to 7.5% this year. Consolidated free cash flow should increase by 30% to $2.3 billion.
The company has a $2.6 billion capital program scheduled for 2024, including expansions and upgrades of its wireless and wireline networks. Telus uses debt to fund part of its growth program, so high interest rates are driving up borrowing costs. This is one reason the stock sold off over the past two years. The Bank of Canada just cut interest rates for the first time since 2020, and more reductions are expected by the end of 2024 and through 2025. As borrowing costs decline, interest in the stock should rise.
Telus has increased its dividend annually for more than two decades. At the current share price, investors can get a dividend yield of 7.2% from Telus stock.
The bottom line on top stocks for TFSA passive income
Enbridge and Telus 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.
