TFSA Investors: 2 Standout Domestic Stocks With 7% Yields

These top dividend-growth stocks look oversold.

| More on:
Blocks conceptualizing Canada's Tax Free Savings Account

Source: Getty Images

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.

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 and TELUS. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker owns shares of Telus and Enbridge.

More on Dividend Stocks

Cogs turning against each other
Dividend Stocks

How Interest Rate Cuts Affect REITs

Now is a good time to investigate Canadian REITs and take a position in the form of stocks or exchange…

Read more »

Simple life style relaxation with Asian working business woman healthy lifestyle take it easy resting in comfort hotel or home living room having free time with peace of mind and self health balance
Dividend Stocks

3 Affordable Passive-Income Stocks That Pay Monthly

These three monthly-paying dividend stocks could boost your passive income.

Read more »

alcohol
Dividend Stocks

Retirees: 2 High-Yield Dividend Stocks to Buy in July

Retirees can rely on these dividend stocks for steady passive income and high yields.

Read more »

A Canada Pension Plan Statement of Contributions with a 100 dollar banknote and dollar coins.
Dividend Stocks

CPP Benefits Not Enough? This Top Dividend Stock Can Help Fund Your Retirement

Dividend stocks like Fortis Inc (TSX:FTS) have funded many a retirement.

Read more »

A steel grain silo storage tank with solar panel in a yellow canola field in bloom in Alberta, Canada.
Dividend Stocks

The Ultimate TSX Stock to Buy With $1,000 Right Now

Once at triple-digit prices, Nutrien stock (TSX:NTR) now offers a steal of a deal for long-term growth as well as…

Read more »

Paper Canadian currency of various denominations
Dividend Stocks

Set and Forget: 1 Dividend Stock That Could Create $1,000 in Tax-Free Passive Income in 10 Years

Enbridge operates a low-risk business that has allowed the TSX dividend giant to raise its payout by 10% annually since…

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

Passive Income: How to Make $106 Per Month Tax Free

Holding quality, high-yield dividend stocks such as Freehold Royalties in a TFSA can help you earn tax-free income for life.

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

How to Earn a TFSA Paycheque Every Month and Pay No Taxes on it

Stocks like First National Financial (TSX:FN) pay you monthly. You can also earn monthly dividends through portfolio diversification.

Read more »