Market volatility has Canadian retirees wondering which TSX stocks might be good to buy right now for a self-directed Tax-Free Savings Account (TFSA) portfolio focused on passive income.
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Fortis
Fortis (TSX: FTS) is a good example of a dividend-growth stock retirees can rely on in challenging economic times. The board at Fortis has increased the dividend annually for the past 51 years.
Fortis owns and operates utility assets in Canada, the United States, and the Caribbean. These businesses include natural gas distribution utilities, power-generation facilities, and electricity transmission networks. Nearly all the revenue is rate-regulated. This means cash flow tends to be stable and predictable, which helps Fortis plan its investment program.
Fortis grows through a combination of acquisitions and organic projects. The current $26 billion capital program is expected to raise the rate base from about $39 billion in 2024 to $53 billion in 2029. As new assets are completed and go into service, the boost to cash flow should support planned annual dividend increases of 4% to 6%.
Fortis trades near $65 per share at the time of writing. Investors currently get a 3.8% dividend yield on the stock. The yield is lower than what is available from other companies, but the steady dividend growth will boost the yield on the initial investment.
Enbridge
Enbridge (TSX: ENB) made a big move last year to further diversify its assets. The company spent US$14 billion to buy three natural gas utilities in the United States. The addition of the businesses turned Enbridge into the largest natural gas utility operator in North America. Revenue from these assets is reliable, and there are opportunities for organic growth.
Natural gas demand is expected to rise in the next few years as gas-fired power plants are built to supply electricity to artificial intelligence data centres. Enbridge’s extensive natural gas transmission network and distribution utilities put the company in a good position to benefit. Down the road, hydrogen could become a core fuel source. It can be blended with natural gas to reduce the carbon intensity of burning the fuel.
Enbridge’s oil transmission network and its oil export facilities remain strategically important for Canada and the United States. The company moves about 30% of the oil produced in the two countries. In Canada, there is renewed interest in building east-west pipeline infrastructure. With its position as the country’s largest pipeline company, Enbridge could potentially see a new major project emerge to drive revenue expansion.
In the meantime, Enbridge is working on a $26 billion capital program that will boost distributable cash flow by about 3% over the next few years. This should support ongoing dividend growth. Enbridge has increased the dividend in each of the past 30 years. Investors who buy ENB stock at the current price can get a dividend yield of 6.2%.
The bottom line on TFSA passive income
Fortis and Enbridge pay good dividends that should continue to grow. If you have some cash to put to work in a TFSA targeting passive income, these stocks deserve to be on your radar.
