Retirees and other income investors are searching for good Canadian dividend stocks to buy for their self-directed Tax-Free Savings Account (TFSA) portfolios.
The big jump in the TSX over the past year wiped out some of the best deals in the market, but investors can still find good high-yield dividend stocks trading at reasonable prices.
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TD Bank stock
TD (TSX: TD) ran into trouble with U.S. regulators over the past year for not having adequate systems in place to identify and prevent money laundering through branches in the U.S. retail banking operations.
Canada’s second-largest bank by market capitalization is best known for its extensive branch network in the domestic market, but TD actually has more locations in the United States. As such, the issue with the U.S. business has caused concern for investors for some time and is a key reason the stock price is down from $108 in early 2022 to the current price around $78.
As a penalty, TD has to pay fines of about US$3 billion and is being hit with an asset cap in the U.S. market. This means TD will see its growth ambitions in the Untied States severely restricted for some time. Markets had anticipated the fine, but the announcement of the asset cap earlier this month led to the latest drop in the share price.
The good news for investors is that there is now clarity on the situation. TD remains a very profitable bank, despite the headwinds, and will find other opportunities to grow the business. A new CEO is taking over next year to give the bank a clean slate at the senior executive level. Investors will have to be patient to see how the growth strategy unfolds, but you get paid a solid 5.2% dividend yield to wait.
Enbridge
Enbridge (TSX: ENB) recently closed the final leg of its US$14 billion acquisition of three natural gas utilities in the United States. The addition of the assets will make Enbridge the largest natural gas utility operator in North America. Enbridge has also expanded into exports through its purchase of an oil export terminal in Texas and is a partner on the Woodfibre liquified natural gas (LNG) export terminal being built in British Columbia.
The new assets, along with a growing renewable energy division, help diversify the revenue stream and complement the core oil and natural gas transmission businesses.
Lower interest rates should help reduce borrowing expenses for growth projects. New revenue from the acquisitions and Enbridge’s $24 billion capital program will boost earnings and distributable cash flow in the next few years. Based on this, investors should see dividend growth continue in the 3% to 5% range.
Enbridge raised the dividend in each of the past 29 years. Investors who buy the stock at the current level can get a yield of 6.4%.
The bottom line on top TSX dividend stocks
TD and Enbridge pay attractive dividends that should continue to grow. If you have some cash to put to work, these stocks deserve to be on your radar.
