Creating multiple passive income streams will help Canadian retirees supplement pension plans such as the Canada Pension Plan and Old Age Security. This strategy should help most retirees lead comfortable lives even when their monthly paycheque stops.
A low-cost strategy to begin a recurring passive income stream is investing in blue-chip dividend stocks that offer an attractive yield. Here are two quality TSX dividend stocks that can provide you with big income in retirement. Let’s dive deeper.
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TC Energy stock
Valued at $47.4 billion by market cap, TC Energy (TSX:TRP) has generated a compounded annual growth rate of 11% to shareholders since 2000. Despite these steady gains, it offers investors a dividend yield of 6.2%, given an annual payout of $2.85 per share.
With $128 billion in total assets, TC Energy operates a pipeline network that transports natural gas from supply basins to local distribution companies, power generation plants, industrial facilities, LNG export terminals and other businesses. Moreover, it has regulated natural gas storage facilities with a total working gas capacity of roughly 550 million cubic feet.
The Canadian energy giant has interests in seven power generation facilities with a combined capacity of 4,300 megawatts that are powered by cleaner energy sources such as natural gas and nuclear fuel.
TC Energy’s growth story is far from over, given that the company has allocated $31 billion in capital expenditures through 2028. The company’s cash flows are reliable, as 95% of its comparable EBITDA (earnings before interest, tax, depreciation, and amortization) is tied to rate-regulated assets or long-term contracts.
This cash flow visibility has allowed TC Energy to increase its annual dividend per share from $0.8 in March 2000 to $3.84 in October 2024, indicating a CAGR of almost 7%.
Despite a challenging macro environment in 2024, TC Energy increased its adjusted EBITDA by 9% year over year to $2.7 billion in Q3 2024. The company expects to end the year with EBITDA between $11.2 billion and $11.5 billion.
In the first six months of 2024, it has already placed $1.2 billion in assets into service and is on track to place $7 billion this year.
Enbridge stock
Enbridge (TSX:ENB) is another pipeline giant that should be a part of your dividend portfolio today. The Canadian energy behemoth has increased its annual dividends from $0.27 per share to $3.66 per share in the last 27 years, indicating a CAGR of over 10%.
It ended Q2 with a debt-to-EBITDA of less than 4.7 times, giving the company the flexibility to execute its capital allocation priorities.
Enbridge recently closed the acquisition of three natural gas utilities from Dominion Energy, which should increase future cash flow and dividends.
In the last six months, its EBITDA rose to $9.3 billion, up from $8.5 billion in the year-ago period. Its distributable cash flow per share also rose from $2.94 to $2.97 year over year in the last six months.
Given its dividend expense, Enbridge ended Q2 with a payout ratio of 61.6%, which is sustainable even if commodity prices move lower. In the last 12 months, Enbridge stock has returned 26.5%. However, if we adjust for dividend reinvestments, cumulative returns are higher at 36%.
