Pensioners and other investors are using their self-directed Tax-Free Savings Account (TFSA) to build stock portfolios that can generate steady and growing passive income to complement government and company pensions.
With the TSX sitting near its record high and economic uncertainty on the horizon, it makes sense to seek out top dividend-growth stocks that can raise their distributions in all economic conditions.
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Fortis
Fortis (TSX: FTS) increased its dividend in each of the past 51years. That’s right, the company gave investors a raise through the Black Friday crash, the dotcom crash, the subprime financial crisis, and the pandemic.
Fortis operates $75 billion in utility assets located across Canada, the United States, and the Caribbean. Businesses in the portfolio include power generation sites, electricity transmission grids, and natural gas distribution utilities. Companies and households need to use electricity and natural gas regardless of the state of the economy. Revenue is rate-regulated, so the cash flow tends to be predictable and reliable.
Fortis hasn’t made a large acquisition for several years, but continues to drive growth through a substantial capital program. The current $26 billion development portfolio will 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 company expects earnings to increase enough to support planned annual dividend growth of 4% to 6% over the coming five years. Fortis has other projects under consideration that could get added to the mix. This would potentially boost the size of the dividend increases, or extend the dividend-growth guidance.
Investors who buy FTS stock at the current level can pick up a dividend yield of 3.8%. The company has a dividend reinvestment plan (DRIP) that provides a 2% discount on stock purchased using the dividends.
Enbridge
Enbridge (TSX: ENB) is a giant in the energy infrastructure and utility sectors. The company is arguably best known for its extensive oil pipeline and oil export operations, which move 30% of the oil produced in Canada and the United States. The export terminal in Texas is a key link for producers to ship to international buyers. Renewed interest in oil pipelines in Canada could lead to new growth projects for Enbridge in the segment.
On the natural gas side, Enbridge spent US$14 billion in 2024 to buy three natural gas utilities in the United States. The deals further diversified the revenue stream, while making Enbridge the largest operator of natural gas utilities in North America. Natural gas demand is expected to rise in the coming years as gas-fired power generation facilities are built to provide electricity for hundreds of new AI data centres.
Enbridge is working on a $28 billion capital program that will help drive earnings and distributable cash flow growth in the next few years. This should support ongoing dividend hikes. Enbridge raised the dividend in each of the past 30 years.
The stock is off the 2025 high, so there is an opportunity to buy on a modest dip. At the time of writing, investors can get a dividend yield of 6.1%.
