Retirees and other dividend investors are looking for top TSX dividend stocks to add to self-directed Tax Free Savings (TFSA) portfolio focused on passive income.
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TC Energy
TC Energy (TSX: TRP) recently completed the spinoff of its oil pipelines business. The move helped unlock some value for shareholders and should make TC Energy more attractive to institutional investors who might have avoided the stock previously due to ESG restrictions.
TC Energy’s remaining assets primarily consist of natural gas transmission and storage infrastructure, along with some power generation facilities. Natural gas is a fossil fuel, but it emits less carbon dioxide when burned than oil or coal. This is why natural gas is viewed as an important fuel for power generation as the world transitions to renewable energy.
In the past year, reliable power sources have come into focus as tech companies ramp up plans for construction of AI data centres that consume significant amounts of electricity. Firms are looking at building onsite gas-fired power generation facilities to ensure the data centres have reliable and scalable power. There are concerns that existing power infrastructure isn’t going to be adequate to meet the anticipated jump in electricity demand.
TC Energy sees itself as being well-placed to supply the natural gas required for the new facilities. In a statement this year, the company said its infrastructure is within 80km of 60% of the data centres planned or under construction in the United States.
TC Energy has a capital program on the go that will see it invest $6 billion to $7 billion per year over the medium term. As new assets go into service the resulting boost to cash flow should support dividend growth. TC Energy has increased the dividend annually for the past 24 years. Investors who buy TRP stock at the current price can get a dividend yield of 6%.
Telus
Telus (TSX: T) trades near $22 at the time of writing. This isn’t too far above the 12-month low around $20 and is down considerably from the $34 it reached in 2022.
Telus is arguably a contrarian pick right now. Rising interest rates, price wars, and regulatory uncertainty, along with revenue challenges at Telus Digital (TSX: TIXT), have all impacted the stock. Near-term headwinds remain, but the pullback might be overdone.
High interest rates have put pressure on profits in the past two years as debt expenses increased. Recent rate cuts by the Bank of Canada should help ease the strain in 2025. Telus has also reduced staff numbers considerably in the past year to lower operating expenses.
Despite the challenges, Telus still expects to deliver growth in earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2024 compared to last year. Investors who buy Telus stock at the current share price can get a dividend yield of 7%.
The bottom line on top stocks for passive income
TC Energy and Telus pay solid dividends with high yields. If you have some cash to put to work in a TFSA focused on passive income, these stocks deserve to be on your radar.
