Retirees and other self-directed Tax-Free Savings Account (TFSA) investors are searching for reliable dividend stocks on the TSX to add to their portfolios focused on passive income.
Fortis
Fortis (TSX:FTS) trades near $62 per share at the time of writing. The stock is up about 22% in the past year, but it is still below the $65 it reached in 2022 before hikes to interest rates hit the utility sector.
Recent rate cuts in Canada and the United States will reduce borrowing costs for Fortis. The company uses debt to fund part of its growth program, so lower interest expenses will free up more cash for distributions and can boost profits.
Fortis is working on a $25 billion capital program that is expected to raise the rate base from $37 billion in 2023 to more than $49 billion in 2028. As new assets go into service, the jump in cash flow should support planned annual dividend increases of 4-6%. Fortis raised the distribution in each of the past 50 years. Investors who buy the stock at the current level can get a yield of 4%.
Enbridge
Enbridge (TSX:ENB) has increased its dividend annually for the past 29 years. The pipeline giant diversified its asset base in recent years with big investments in natural gas utilities and renewable energy projects, as well as oil and natural gas exports. Demand for North American energy is expected to grow as countries seek out reliable supplies amid rising geopolitical risks in key oil and gas regions.
Enbridge just completed its US$14 billion purchase of three natural gas utilities in the United States. The company also has a $24 billion capital program on the go. These new assets will help boost cash flow. Investors who buy ENB stock at the current level can get a dividend yield of 6.6%.
Telus
Telus (TSX:T) has also increased its dividend annually for more than two decades. The company gets most of its revenue from bundled mobile, internet, and television subscription services that tend to be sticky and are generally resistant to recession. It also has interesting subsidiaries, including Telus Health, Telus Agriculture and Consumer Goods, and Telus Digital.
Price wars, regulatory uncertainty, high interest rates, and lower revenue at Telus Digital have combined to put pressure on Telus in the past couple of years. The stock trades near $22 at the time of writing compared to $34 at the high point in 2022. This is arguably a contrarian pick, as near-term headwinds are expected, but the dividend should be safe, and investors can now get a yield near 7%.
The bottom line on stocks for TFSA passive income
Fortis, Enbridge, and Telus pay attractive dividends that should be safe. If you have some cash to put to work in a TFSA focused on passive income, these stocks deserve to be on your radar.
