Canadians of all ages are searching for top TSX stocks to add to their self-directed Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP) portfolios. One popular strategy involves buying stocks with long track records of dividend growth.
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Fortis
Fortis (TSX: FTS) is up 20% in the past year and trades near its all-time high.
Rising interest rates in 2022 and 2023 are the reason Fortis investors saw the share price fall from $65 in 2022 to $50 at one point before staging a recovery. Rate cuts spurred the rebound.
The stock’s upward trend gained momentum in the second half of last year as the Bank of Canada and the U.S. Federal Reserve began cutting interest rates. Utility companies use a lot of debt to fund large capital projects that cost billions of dollars and can take years to complete. Rising interest expenses cut into profits and can reduce cash that is available for distribution to shareholders. Higher borrowing costs can also reduce the number of growth projects that get the green light.
Fortis is currently working on a $26 billion capital program that will increase the rate base from $39 billion in 2024 to $53 billion in 2029. As the new assets are completed and go into service, the jump in revenue and cash flow should support planned annual dividend increases of 4% to 6% over five years. Fortis has increased the dividend annually for five decades. Investors who buy FTS stock at the current level can get a dividend yield of 3.8%.
Enbridge
Enbridge (TSX: ENB) spent US$14 billion in 2024 to buy three natural gas utilities in the United States. The deals turned Enbridge into the largest natural gas utility operator in North America. Natural gas demand is expected to rise in the coming years as gas-fired power production facilities are built to provide electricity for new artificial intelligence data centres.
Enbridge has also expanded into energy exports. The company purchased an oil export terminal in Texas and is a partner in the Woodfibre liquified natural gas (LNG) facility being built in British Columbia. International demand for North American oil and natural gas is growing as countries look for reliable supplies from stable providers.
Enbridge’s legacy oil and natural gas transmission infrastructure remains strategically important for the Canadian and American economies. Opportunities to build new cross-country pipelines in Canada could emerge in the near term as Canada looks to limit its reliance on the United States for energy trade.
Enbridge also has a capital program of $26 billion on the go to drive revenue and cash flow growth. This should enable ongoing dividend increases in the 3% range over the medium term. The board has increased the payout in each of the past 30 years. Investors who buy ENB stock at the current level can get a dividend yield of 6%.
The bottom line on top TSX dividend stocks
Fortis and Enbridge are good examples of TSX stocks that have long track records of delivering steady dividend growth. If you have some cash to put to work in a portfolio focused on dividends, these stocks deserve to be on your radar.
