Canadian retirees are searching for ways to get better returns on their savings and boost earnings. One popular strategy involves holding top TSX dividend stocks inside a Tax-Free Savings Account (TFSA). The pullback in the share prices of many great dividend-growth stocks is giving retirees a chance to buy at discounted prices to secure attractive yields.
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Enbridge
Enbridge (TSX:ENB) is a giant in the North American energy infrastructure industry with a current market capitalization near $102 billion. The company’s oil pipeline network moves 30% of the oil produced in Canada and the United States. The natural gas transmission network carries 20% of the natural gas used by American homes and businesses. In addition, Enbridge is set to become the largest natural gas utility operator in North America once it completes the final part of its US$14 billion acquisition of three natural gas utilities in the United States. The company also has an oil export terminal and a growing renewable energy group with assets in Canada, the U.S., and Europe.
Enbridge is working on a $25 billion secured capital program that will help drive revenue growth in the coming years. As the new assets go into service management expects distributable cash flow to expand by 3% annually through 2026 and by 5% beyond that timeline. This should support ongoing dividend increases in the 3-5% range. Enbridge raised the dividend in each of the past 29 years.
Enbridge trades near $48 per share at the time of writing compared to $59 at one point in 2022, so there is decent upside potential.
As interest rates decline, funds should start to rotate back into the stock. Investors who buy at the current level can get a 7.6% dividend yield.
TC Energy
TC Energy (TSX:TRP) is another high-yield pipeline stock that looks oversold. The company has more than 93,000 km of natural gas pipelines and 650 billion cubic feet of natural gas storage located across Canada, the United States, and Mexico. Power-generation facilities and oil pipelines round out the assets, although TC Energy is planning to spin off the oil pipeline group this year.
TC Energy’s 670 km Coastal GasLink pipeline reached mechanical completion last year at a cost of roughly $14.5 billion, which is more than double the initial estimate. Management has done a good job of monetizing non-core assets to reduce debt taken on to complete the project. CoastalGas Link also recently closed a $7.15 billion bond issue.
Looking ahead, TC Energy will invest about $8 billion in capital projects in 2024 and is planning to spend $6 billion to $7 billion annually over the medium term. This should drive revenue growth to support dividend increases of at least 3%.
TC Energy raised the distribution in each of the past 24 years. The stock trades near $53.50 at the time of writing. This is off the 12-month low of around $44 but is still down from the $74 the stock hit in 2022. Investors who buy at the current level can get a 7.2% dividend yield from TRP stock.
The bottom line on top stocks for passive income
Enbridge and TC Energy pay attractive dividends that should continue to grow. If you have some cash to put to work in a portfolio focused on high-yield passive income, these stocks deserve to be on your radar.
