Canadian pensioners are looking for good TSX stocks to add to their self-directed Tax-Free Savings Account (TFSA) focused on generating steady and growing passive income.
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Fortis
No dividend is 100% safe, but Fortis (TSX:FTS) is probably as close as it gets in the Canadian market. The board has increased the dividend in each of the past 51 years, and management is providing guidance for annual dividend growth of 4% to 6% through at least 2029.
Fortis isn’t immune to market downturns. The stock slid from $64 per share in May 2022 to as low as $50 in October that year. Aggressive interest rate hikes by the Bank of Canada and the U.S. Federal Reserve triggered the pullback as investors worried that higher borrowing costs would reduce profits, cut into cash available for distributions, and delay some projects. Fortis uses debt to fund part of its capital program, which includes projects that cost billions of dollars.
As soon as the central banks started to cut interest rates last year, the utility sector let out a sigh of relief, and investors started to move back into these stocks.
Analysts broadly expect to see additional rate cuts in Canada and the United States in the next 12 months. The timing and the extent of the cuts is unknown. For the moment, the central banks are waiting to see if tariffs will cause a new spike in inflation. If that happens, rate cuts will be tough to implement. Some pundits even think rate hikes could be on the way. If inflation remains reasonable, however, and the economy slips into a recession, rate cuts could occur faster than anticipated.
Fortis is a good stock to own if you simply want to collect steady and growing income and don’t want to worry too much about the near-term volatility in the markets. The long-term trend for the stock has been upward. Investors who buy FTS stock at the current level can get a dividend yield of 3.7%.
Enbridge
Enbridge (TSX:ENB) raised its dividend in each of the past 25 years. The energy infrastructure firm continues to grow through a combination of acquisitions and organic projects. Enbridge bought three American natural gas utilities in 2024 for US$14 billion. The deals made Enbridge the largest natural gas utility operator in North America. These assets complement Enbridge’s natural gas transmission network, which carries about 20% of the natural gas used in the United States. Natural gas demand is expected to rise in the coming years as new gas-fired power stations are built to supply electricity for artificial intelligence data centres.
Enbridge’s oil transmission network and oil export facilities play a strategically important role in getting oil produced in Canada and the United States to domestic refineries and international customers. The company also has a growing renewable energy division.
Enbridge is working on a $28 billion capital program to drive steady earnings and cash flow growth in the coming years. This should support ongoing dividend increases.
The bottom line
Fortis and Enbridge are good examples of top TSX dividend-growth stocks. If you have some cash to put to work, these names deserve to be on your radar.
