Canadian utility stocks rebounded in 2024 on the back of cuts to interest rates. Investors who missed the rally are wondering which TSX utility stocks might still be good value to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on dividends and total returns.
Source: Getty Images
Fortis
Fortis (TSX:FTS) trades near $61.50 per share at the time of writing. The stock is down from a recent high of $64 but is still up 15% in the past year.
Fortis owns and operates power generation, natural gas distribution, and electricity transmission utility businesses in Canada, the United States, and the Caribbean. Revenue from these assets is mostly rate-regulated, meaning cash flow tends to be predictable and reliable.
Fortis grows through a combination of capital projects and acquisitions. The current $26 billion capital program is expected to boost the rate base from roughly $39 billion in 2024 to $53 billion in 2029. As the new assets are completed and go into service, the jump in cash flow should support planned annual dividend increases of 4% to 6% over the next five years. This is good guidance in an uncertain economic climate.
Fortis raised the dividend in each of the past 51 years, so investors should be comfortable with the dividend-growth outlook. Investors who buy Fortis at the current level can get a dividend yield of 4%.
Enbridge
Enbridge’s (TSX:ENB) US$14 billion purchase of three American natural gas utilities in 2024 significantly increased the utility side of the business and made Enbridge the largest natural gas utility operator in North America. Natural gas demand is expected to rise in the coming years as tech companies build gas-fired power facilities to supply electricity for artificial intelligence data centres.
Enbridge’s oil pipelines and oil export facilities remain important assets for the business. Enbridge moves nearly 30% of the oil produced in Canada and the United States, and its oil export terminal in Texas is a key hub for sending oil to international buyers.
Energy security is now a concern for Canada in the wake of the tariff threats from the new U.S. administration. Significant hurdles remain to get new oil pipelines approved and built in Canada, but there is potential for projects that were considered impossible a few months ago to be considered once again for getting Canadian oil to new customers in the coming years.
Enbridge’s capital program is also about $26 billion right now. This should drive steady revenue growth over the medium term.
ENB stock pulled back a bit in the past week, falling from $65 to the current price near $60. Investors who buy the dip can get a dividend yield of 6.3% on the stock. The board raised the dividend in each of the past 30 years.
The bottom line on top TSX utility stocks
Fortis and Enbridge pay good dividends that should continue to grow. If you have some cash to put to work in a TFSA or RRSP focused on stable and growing dividends, these stocks deserve to be on your radar.
