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Pensioners and other dividend investors are searching for good TSX stocks to buy for a self-directed Tax-Free Savings Account (TFSA) focused on passive income. With markets near record highs, it makes sense to look for stocks that have a history of paying reliable and growing distributions.
Enbridge
Enbridge (TSX:ENB) is a major player in the North American energy infrastructure sector with extensive oil and natural gas transmission networks that move roughly 30% of the oil produced in Canada and the United States, and about a fifth of the natural gas used by American homes and businesses.
Getting large new pipelines approved and built is difficult these days. In recent years, Enbridge shifted its growth investments to focus on export, natural gas utilities, and renewable energy. The move has diversified the revenue stream while enabling Enbridge to benefit from new opportunities that are emerging in the domestic and global markets.
Enbridge trades near $56.50 at the time of writing. The stock has enjoyed a good recovery over the past year, but is still shy of the $59 it reached in 2022 before the extended slump that occurred as interest rates rose in Canada and the United States. Now that the central banks are cutting rates, Enbridge should benefit from reduced borrowing expenses.
The company has a $24 billion development program on the go that will help boost cash flow to support the dividend. Enbridge raised the payout in each of the past 29 years. Investors who buy ENB stock at the current price can get a yield of 6.5%.
Fortis
Fortis (TSX:FTS) has a dividend yield of about 4% at the time of writing. This is lower than the yield investors can get on many stocks. However, Fortis has increased its distribution annually for the past 50 years and intends to boost the distribution by 4% to 6% every year through at least 2028. This is great guidance as markets head into some uncertain economic conditions. Each new dividend increase raises the yield on the initial investment, so investors get a decent return over time. In addition, Fortis provides a 2% discount for shares purchased using the dividend reinvestment plan.
Fortis is working on a $25 billion capital program that will drive revenue growth in the coming years. Additional projects are under consideration that could be added to the backlog and extend the growth outlook. Fortis hasn’t made a large acquisition for several years, but that could change as interest rates decline and consolidation continues in the utility sector. At some point, Fortis might even become a takeover target as alternative asset managers or larger utilities seek out solid businesses that spin off good cash flow.
The bottom line on top stocks for passive income
Enbridge and Fortis are good examples of top TSX stocks paying attractive dividends that should continue to grow. If you have some cash to put to work in a self-directed portfolio focused on passive income and total returns, these stock deserve to be on your radar.
