Canadians have an extra $,7000 in Tax-Free Savings Account (TFSA) contribution space in 2025. With the TSX near a record high, investors are wondering which stocks might still be good to buy in 2025 for a TFSA focused on dividends and total returns.
Enbridge
Enbridge (TSX:ENB) is up 33% in the past 12 months and recently hit a new all-time high.
The rebound is welcome news for long-term investors who watched the share price slide from $59 in 2022 to as low as $44 in late 2023. At the time of writing, ENB stock trades for close to $64.50.
Rising interest rates in Canada and the United States drove most of the pullback in 2022 and 2023. During that time, investors worried that the sharp increase in borrowing costs would force Enbridge to trim its generous dividend. Enbridge uses debt to fund part of its growth program, which includes internal projects and acquisitions. A jump in interest expenses eats into profits and reduces cash that can be used to pay dividends or reduce debt.
The stock started to recover as soon as the central banks indicated they were done raising rates. The surge over the past few months came as a result of rate cuts.
On the operational side, Enbridge also has some positive momentum. The company completed its US$14 billion purchase of three American natural gas utilities last year. The assets complement Enbridge’s extensive natural gas transmission network that moves roughly 20% of the natural gas used in the United States. With the Trump administration pushing for expansion of natural gas production and exports, Enbridge should benefit. In addition, gas-fired power generation is expected to grow in the next few years to supply power for new artificial intelligence data centres.
Enbridge is working on a $27 billion capital program that will boost revenue in the coming years to help support ongoing dividend increases. The board raised the dividend in each of the past 30 years. Investors who buy ENB stock at the current price can get a dividend yield of 5.85%.
Fortis
Fortis (TSX:FTS) has increased its dividend for 52 consecutive years. The utility company owns and operates businesses in Canada, the United States, and the Caribbean. These include rate-regulated natural gas utilities, power-generation facilities, and electricity transmission networks.
Revenue and cash flow from the assets tend to be predictable and reliable. This helps Fortis plan its capital program, which is currently $26 billion. The company expects the rate base to rise from $38.8 billion in 2024 to about $53 billion in 2029. As the new assets are completed, the boost to cash flow should support planned annual dividend growth of 4% to 6% over five years.
Fortis also enjoyed a nice rally in the second half of 2024 but has given back a bit of the gain in recent weeks. Investors who buy the dip can pick up a dividend yield of 4% on the stock today and simply sit back and watch the dividend growth boost the yield on the investment in the coming years.
The bottom line
Near-term volatility should be expected. As such, investors might want to consider taking a half position and look to add on weakness. Enbridge and Fortis are good examples of dividend-growth stocks to consider for a TFSA focused on income and long-term total returns.
