Retirees can consider using the Tax-Free Savings Account (TFSA) benefits to begin a low-cost passive-income stream. Launched 15 years back, the TFSA is among Canada’s most popular registered accounts due to its tax-sheltered status. For instance, any returns earned from qualified investments in the TFSA are exempt from Canada Revenue Agency taxes.
The maximum cumulative contribution room for TFSA holders has increased to $95,000 in 2024. Investors with a long-term horizon may consider holding blue-chip dividend stocks in this account to create a reliable passive-income stream and benefit from capital gains.
Here is one such top TSX dividend stock you can buy and hold in the TFSA right now.
Is Enbridge stock a good buy?
Enbridge (TSX:ENB) is a diversified energy infrastructure company valued at $129 billion by market cap. It operates pipelines and terminals transporting crude oil and other liquid hydrocarbons across North America.
The TSX giant has invested in natural gas pipelines and gathering and processing facilities. Moreover, Enbridge has a gas distribution and storage business that serves residential, commercial, and industrial customers. It also has a renewable energy business that operates power-generating assets such as wind and solar.
Despite its massive size, Enbridge’s growth story is far from over. It recently closed the acquisition of three U.S. gas utilities for $19 billion, which will be accretive to Enbridge’s cash flows and offer diversification to investors. Further, it expects to place $5 billion of secure capital into service this year, which should drive future earnings higher.
Should you own this TSX dividend stock?
In the third quarter (Q3) of 2024, Enbridge reported a distributable cash flow per share of $1.19. Given it pays shareholders a quarterly dividend of $0.915 per share, its payout ratio stood at 77%, which might seem high. However, in the last 28 years, Enbridge has raised its dividends at an average annual rate of 10%, enhancing its effective yield over time.
Enbridge’s cash flows are predictable as they are tied to long-term, inflation-linked contracts, enabling it to support dividend payments across market cycles. With a forward yield of 6.2%, ENB stock remains a top buy for income-seeking investors.
The energy heavyweight aims to maintain a leverage ratio of between 4.5 and five times, with a payout ratio of less than 70%. The company continues to deploy between $8 billion and $9 billion each year towards growth investment capacity, the majority of which is in the form of low capital intensity expansion and rate-based investment. It will also deploy excess cash flow towards other organic projects or reduce balance sheet debt.
In the last 20 years, ENB stock has returned 358% to shareholders. However, if we adjust for dividend reinvestments, cumulative returns are much higher at 1,000%.
The Foolish takeaway
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Enbridge | $58.93 | 1,367 | $0.915 | $1,250 | Quarterly |
To earn $5,000 in annual dividend income, you need to buy 1,367 shares of Enbridge today. This investment would be worth close to around $80,560 at current prices. However, investing such a huge sum in a single stock is quite risky. So, Canadians should identify other such TSX stocks that offer a sustainable but attractive dividend payout to benefit from diversification and lower portfolio risk.
