Canadians now have another $7,000 in contribution room inside their Tax-Free Savings Account (TFSA).
One popular investing strategy for a self-directed TFSA focused on passive income is to buy top dividend stocks on the TSX that have good track records of delivering dividend growth.
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Enbridge
Enbridge (TSX:ENB) is a giant in the North American energy infrastructure industry with a current market capitalization of $140 billion. The stock trades at its highest point since 2015 and is close to a new record after chalking up a gain of 33% over the past 12 months.
Enbridge has a $27 billion capital program on the go that will help drive revenue and cash flow growth in the next few years. The company is also benefitting from revenue coming from its US$14 billion purchase of three natural gas utilities in 2024. This should support ongoing dividend increases. Enbridge raised the dividend in each of the past 30 years. At the time of writing, investors can get a dividend yield of 5.9% from ENB stock.
Fortis
Fortis (TSX:FTS) is a utility company with businesses in Canada, the United States, and the Caribbean. The operations include natural gas utilities, power generation facilities, and electricity transmission networks.
Fortis is working on a $26 billion capital program that is expected to boost the rate base from $38.8 billion in 2024 to $53 billion in 2029. As the new assets go into service, the resulting boost to revenue and cash flow should support planned annual dividend increases of 4- 6% over five years. Fortis raised the dividend in each of the past 51 years, so investors should be comfortable with the guidance.
The company has other projects under consideration that could be added to the mix to boost the capital program and extend the dividend-growth guidance. Fortis also makes acquisitions when strategic opportunities are attractive.
Telus
Telus (TSX:T) is a contrarian pick right now. The stock trades near $20 compared to $34 in 2022. Interest rate hikes drove most of the pullback in 2022 and 2023, but the extension of the rout last year is more due to challenges in the communications sector. Telus had to battle through price wars over the past year and the industry is dealing with regulatory uncertainty. In addition, the company’s Telus Digital subsidiary saw revenue slide in 2023 and 2024, resulting in lowered financial guidance by Telus.
That being said, the worst might be over at this point, and most of the pain is probably reflected in the share price.
Telus raised the dividend in 2024, so the board appears comfortable with the cash flow outlook. Investors who buy Telus stock at the current level can get a dividend yield of close to 8%.
The bottom line on top TFSA dividend stocks
Enbridge, Fortis, and Telus are good examples of TSX stocks with long track records of dividend growth. If you have some cash to put to work in a TFSA focused on passive income, these stocks deserve to be on your radar.
