Retirees seeking passive income and younger investors focused on long-term total returns are wondering which Canadian dividend stocks might still be attractive for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP).
After the big rally in the TSX in 2024, it makes sense to look for stocks that have solid track records of dividend growth through good and bad times for the broader market.
Fortis
Fortis (TSX:FTS) recently increased its dividend by 4.2%. The hike marks the 51st consecutive year that the board has given shareholders a raise.
This is a great track record that looks set to continue. Fortis intends to boost the dividend by 4-6% per year through 2029, driven by the $26 billion capital program that should raise the rate base from $38.8 billion to $53 billion over the next five years. As new assets are completed and go into service, the jump in cash flow should support the planned dividend growth.
Fortis has other projects under consideration that could get added to the capital backlog in the next few years. The company also has a history of making strategic acquisitions. With interest rates now in decline, consolidation in the utility sector could ramp up.
At the time of writing, Fortis provides a dividend yield of 3.9%.
Enbridge
Enbridge (TSX:ENB) raised its dividend in each of the past 29 years. The stock has enjoyed a nice rebound over the past 12 months after an extended pullback caused by rising interest rates. Enbridge uses debt to finance part of its growth program, including acquisitions and development projects.
Concerns that Enbridge might have to trim its generous dividend have abated. Bargain hunters started moving back into the stock last fall on the expectation that rates had peaked and would start to decline in 2024. Rate cuts by the Bank of Canada and the U.S. Federal Reserve over the past few months have helped extend the rally.
Despite the surge in the share price, Enbridge still provides a dividend yield of 6% at the current level. The company completed its US$14 billion acquisition of three American natural gas utilities this year and is working on a $24 billion capital program to drive additional growth.
TD Bank
TD Bank (TSX:TD) is a contrarian pick right now. The stock is the worst performer among the large Canadian banks over the past year. This is largely due to troubles in the U.S. operations, where regulators recently hit TD with fines of roughly US$3 billion for having inadequate systems in place to identify and prevent money laundering. An asset cap has also been placed on TD in the United States. That makes the growth outlook uncertain. TD spent billions of dollars over the past 20 years buying regional banks in the U.S. to create a major presence in the American market. Management will have to come up with a new growth strategy in the coming year.
Headwinds are expected to persist while TD sorts out its next steps, but the bank remains very profitable and should eventually get back on track. In the meantime, investors can get a 5.2% dividend yield right now from TD stock.
The bottom line
Fortis, Enbridge, and TD all pay attractive dividends that should continue to grow. If you have some cash to put to work in a dividend portfolio, these stocks deserve to be on your radar.
