Canadian pensioners are searching for good TSX dividend stocks to add to their self-directed Tax-Free Savings Account (TFSA) focused on generating reliable passive income.
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Enbridge
Enbridge (TSX: ENB) is up 30% in the past year.
The stock trades near $63 per share at the time of writing after rebounding from the extended pullback in 2022 and 2023 that saw the share price slide from $59 to as low as $44 when the central banks aggressively raised interest rates to get inflation under control. As soon as rate hikes ended in late 2023, bargain hunters started to buy the shares. The recovery picked up steam in the second half of 2024 as anticipated rate cuts materialized.
Enbridge also received a boost after completing its US$14 billion acquisition of three natural gas utilities in the United States. Natural gas demand is expected to rise in the coming years as gas-fired power generation facilities are built to provide electricity to artificial intelligence data centres.
Enbridge is working on a $26 billion multi-year capital program. Management expects adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to grow by 7% to 9% over the next few years. Distributable cash flow growth is targeted at 3%. This should support ongoing dividend increases in the same range. Enbridge raised the dividend in each of the past 30 years. Investors who buy ENB stock at the current level can get a dividend yield near 6%.
TD Bank
TD Bank (TSX: TD) trades near $84 per share at the time of writing. The stock was as low as $73 late last year but is still well off the $108 it reached in early 2022 before going into a long pullback. Rising interest rates caused the initial pain in 2022 and 2023 as borrowers with too much variable-rate debt were hit by a steep jump in interest expenses. This forced TD and the other Canadian banks to raise provisions for credit losses (PCL).
Last year, TD had some company-specific issues that caused it to miss out on the rally in the bank sector as the central banks reduced interest rates. Regulators in the United States fined TD more than US$3 billion and put a cap on the bank’s U.S. assets as penalties for not having proper systems in place to prevent money laundering at some of its American branches. TD’s growth strategy over the past two decades focused heavily on the American market, so the asset cap is forcing the bank to find new growth opportunities.
TD put a new chief executive officer in place earlier this year. The company recently raised about $20 billion through the sale of the remaining stake in Charles Schwab. Management is allocating $8 billion of the funds for share buybacks and will use the rest to pursue organic growth, along with other initiatives.
It will take time for a strategy shift to deliver results, but most of the bad news should be in the rearview mirror. Investors who buy TD stock at the current level can get a dividend yield of 5%.
The bottom line on top stocks for passive income
Enbridge and TD pay attractive dividends that should be safe. If you have some cash to put to work in a TFSA focused on passive income, these stocks deserve to be on your radar.
