Stock markets are near record highs, but TSX investors can still find good Canadian dividend stocks to add to their self-directed Tax-Free Savings Account (TFSA) focused on income and long-term total returns.
Fortis
Fortis (TSX:FTS) recently raised its dividend by 4.2%. The increase marks 51 consecutive years that the board has given shareholders a raise. This is a great track record that looks set to continue.
Fortis is working on a $26 billion capital program that will boost the rate base from $38.8 billion in 2024 to $53 billion in 2029. The resulting increase in cash flow should support planned annual dividend increases of 4% to 6% over that timeframe. Fortis has other projects under consideration that could be added to the development plan. This would potentially increase the size of the dividend hikes or extend the guidance for dividend growth. Fortis has not completed a large acquisition for several years. As interest rates decline, however, consolidation in the utility sector could ramp up.
Investors who buy Fortis stock at the current level can get a dividend yield of 3.95%.
TD Bank
TD (TSX:TD) is a contrarian pick right now. The stock is out of favour with investors due to penalties from U.S. regulators for not having adequate systems in place to detect and prevent money laundering in the United States operations. TD received a US$3 billion fine that led to the unloading of part of its position in Charles Schwab to avoid depleting the capital position. The bank has also been hit with an asset cap on its American business. This puts the growth program in the United States on hold for a few years. TD has expanded heavily in the United States over the past two decades through acquisitions from Maine right down the east coast to Florida.
Near-term headwinds will persist until TD figures out a new growth strategy for the medium term. That being said, the company remains very profitable and pays an attractive dividend that should be safe. TD trades near $79 per share at the time of writing compared to $108 at the high point in 2022. Investors who buy TD stock at the current level can get a dividend yield of 5.1%.
Canadian National Railway
Canadian National Railway (TSX:CNR) is one of those stocks investors can simply buy and sit on for decades. The rail giant has an extensive network that runs from the Pacific to the Atlantic in Canada and right down through the United States to the Gulf of Mexico. The company moves cars, coal, crude oil, fertilizer, forestry products, grain, and finished goods. Railways provide essential services for the smooth operation of the economy and benefit as economic growth expands.
Port strikes and labour issues have impacted CN this year. As a result, the stock is down about 7% in 2024. Buying CN on big dips has historically proven to be a savvy move for patient investors. The board has increased the dividend annually for more than two decades, and that trend should continue.
The bottom line on top TSX stocks
Fortis, TD, and Canadian National Railway pay solid dividends that should continue to grow. If you have some cash to put to work in a self-directed TFSA, these stocks deserve to be on your radar.
