Canadian retirees and other income investors are searching for ways to get reliable earnings from their Tax-Free Savings Account (TFSA) to complement their government and work pensions. One popular strategy involves owning TSX dividend stocks with long track records of distribution growth.
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Fortis
Fortis (TSX:FTS) is a Canadian utility company with assets spread out across Canada, the United States, and the Caribbean. The businesses include power generation sites, natural gas distribution utilities, and electricity transmission networks.
Fortis gets most of its revenue from rate-regulated assets. This means cash flow tends to be predictable and reliable, which is helpful for management when the company is planning its expansion strategy.
Fortis grows through a combination of acquisitions and capital investments. The current $26 billion capital plan is expected to raise the rate base from $39 billion in 2024 to $53 billion in 2029. As the new assets are completed and go into service, the bump in cash flow should support targeted annual dividend increases of 4% to 6% over five years. Fortis has other projects under consideration that could be added to the capital plan to extend the dividend-growth outlook. On the acquisition side, Fortis hasn’t completed a major deal for several years. Falling interest rates, however, might spark a new wave of consolidation in the utility sector.
Fortis raised the dividend in each of the past 51 years. Investors who buy FTS stock at the current level can get a dividend yield of 3.8%.
Enbridge
Enbridge (TSX:ENB) is a major player in the North American energy infrastructure and natural gas utility sectors. The company’s oil and natural gas transmission systems move about 30% of the oil produced in Canada and the United States and 20% of the natural gas used by American homes and businesses.
Enbridge diversified its assets in the past few years through a series of acquisitions. The company purchased a developer of wind and solar facilities to expand its renewables operations. Enbridge also acquired 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 Canadian and U.S. energy products is expected to grow in the coming years as countries seek out reliable supplies from stable producers. In 2024, Enbridge spent US$14 billion to buy three natural gas utilities in the United States. This made Enbridge the largest natural gas utility operator in North America.
Enbridge is working on a $28 billion capital program to drive additional revenue and cash flow growth. The company expects adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to rise by 7% to 9% through 2025. Adjusted earnings per share (EPS) should rise 4% to 6%, and distributable cash flow (DCF) is expected to increase by 3%. Beyond 2026, Enbridge sees adjusted EBITDA, EPS, and DCF rising at an annual pace of 5%.
This should support steady dividend growth. Enbridge raised the dividend in each of the past 30 years. Investors who buy the stock at the current level can get a dividend yield of 3.8%.
The bottom line on income stocks
Fortis and Enbridge are good examples of reliable dividend stocks with payouts that should continue to grow. If you have some cash to put to work, these stocks deserve to be on your radar.
