Canadian seniors are searching for solid dividend-growth stocks to add to their self-directed Tax-Free Savings Account (TFSA) portfolios focused on generating reliable and growing passive income for retirement.
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Enbridge
Enbridge (TSX: ENB) is a giant in the North American energy infrastructure industry with a current market capitalization of $140 billion. The company moves nearly 30% of the oil produced in Canada and the United States and transports roughly 20% of the natural gas used by American homes and businesses.
In recent years, management diversified the asset portfolio to position Enbridge to benefit from emerging energy trends. Enbridge purchased an oil export terminal in Texas and took a stake in the Woodfibre liquified natural gas (LNG) facility being built in British Columbia. International demand for North American energy is expanding as foreign buyers seek reliable supplies amid geopolitical tensions in key production regions.
Enbridge bulked up its renewable energy assets and recently spent US$14 billion to buy three natural gas utilities in the United States. That deal made Enbridge the largest natural gas utility operator in North America. Natural gas demand is expected to rise in the coming years as gas-fired power facilities are built to supply electricity to artificial intelligence data centres.
Enbridge is up 28% in the past year, supported by falling interest rates in Canada and the United States. Cheaper debt expenses boost profits and can free up more cash for distributions to shareholders.
Enbridge is working on a $26 billion capital program that is expected to drive 7% to 9% growth in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) through 2026. Distributable cash flow growth is targeted at 3%. This should support ongoing dividend increases. 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 of 5.9%.
Fortis
Fortis (TSX: FTS) has a current dividend yield of 3.6%. That’s lower than many other TSX dividend stocks, but Fortis has increased the dividend annually for the past 51 years, and management plans to boost the distribution by 4% to 6% annually through 2029.
Fortis operates utility businesses across Canada, the United States, and the Caribbean. These include natural gas distribution utilities, power generation facilities, and electricity transmission networks. Revenue is primarily rate-regulated, so cash flow tends to be reliable and predictable.
The company has a $26 billion capital program on the go that is expected to increase the rate base from $39 billion in 2024 to $53 billion in 2029. As new assets go into service, the jump in cash flow should support the dividend-growth targets. Fortis also has a good track record of making strategic acquisitions. If lower borrowing costs spark a new wave of consolidation in the utility sector Fortis could either be a buyer or become an acquisition target.
The bottom line on top stocks for passive income
Enbridge and Fortis are good examples of stocks that pay attractive and growing dividends. If you have some cash to put to work in a self-directed Tax-Free Savings Account focused on passive income, these stocks deserve to be on your radar.
