Investing in top Canadian dividend stocks can be a solid way to generate passive income. A Tax-Free Savings Account (TFSA) makes this strategy even better by letting you grow dividends, interest, and capital gains tax-free, which can significantly boost long-term returns. With this background, here are three fundamentally strong dividend stocks worth holding forever in a TFSA for a stress- and tax-free income.
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Dividend stock #1
Fortis (TSX: FTS) is a leading North American regulated electric and gas utility company famous for offering worry-free dividends. With regulated utilities accounting for 99% of Fortis’ assets, the company generates growing and predictable earnings and cash flows in all market conditions, supporting its payouts.
Primarily focused on energy delivery, 93% of Fortis’s assets are in transmission and distribution, which bring low-risk, stable returns. Thanks to its resilient business model and growing cash flows, Fortis has raised its dividend for 51 years straight. The company plans to keep up this trend by investing in its regulated asset base, which supports future earnings growth.
Fortis expects its rate base to grow at a compound annual growth rate (CAGR) of 6.5% through 2029, enabling it to increase its dividend by 4–6% annually during the same period.
In summary, Fortis’s low-risk earnings base, resilient business model, growing regulated asset base, and visibility on future dividend growth make it a reliable income stock. Further, Fortis offers a well-protected yield of 4.1%.
Dividend stock #2
TFSA investors could add Enbridge (TSX: ENB) stock for its reliable dividend payments and attractive yield. Enbridge is an energy infrastructure company with an extensive liquids pipeline network connecting major demand and supply zones. This robust infrastructure, backed by long-term contracts, helps Enbridge generate stable earnings and distributable cash flow (DCF) through various economic and commodity cycles.
Enbridge’s growing DCF has enabled it to pay dividends for over 69 years. Moreover, the energy company has increased its dividend for 29 consecutive years at a CAGR of 10%. Besides growing dividends, Enbridge stock offers a high yield of 6.5%.
Enbridge is well-positioned to continue growing its dividend thanks to its extensive pipeline network, high asset utilization, long-term contracts, power-purchase agreements, and regulated tolling frameworks. Further, its multi-billion capital projects and strategic acquisitions are set to accelerate growth and enhance its asset base.
Enbridge’s management is optimistic and aims to reward its shareholders with higher dividends. The company’s EPS (earnings per share) and DCF will likely grow at a mid-single-digit rate over the long term. This will help Enbridge to consistently increase its dividends.
Dividend stock #3
Shares of Canadian communication giant BCE (TSX: BCE) are a compelling investment for TFSA investors. The company’s stellar dividend payments history, ability to grow earnings in all market conditions, focus on returning higher cash to shareholders, and high yield makes BCE a top passive income stock.
BCE has raised its dividend for 16 consecutive years and is on track to increase it further in the coming years. It offers an attractive yield of 8.9%.
BCE’s extensive broadband fibre network and fast 5G services give it an edge in the highly competitive telecom sector. The company’s cost-efficient promotions and targeted expansions have contributed to its consistent earnings growth, enabling it to maintain and increase its dividend.
In addition to its core telecom services, BCE is expanding into high-growth segments such as digital advertising, cloud computing, and cybersecurity. These areas offer additional revenue streams and enhance BCE’s resilience to market fluctuations. Meanwhile, ongoing cost-cutting measures further support the company’s commitment to shareholder returns, positioning BCE to sustain dividend growth for years to come.
