Retirees and other dividend investors are wondering which TSX stocks might still be reasonably valued and good to buy for a self-directed Tax-Free Savings Account (TFSA) focused on passive income and total returns.
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Fortis
Fortis (TSX:FTS) trades near $64.50 at the time of writing compared to more than $69 earlier this year. Investors can take advantage of the pullback to buy one of Canada’s top dividend-growth stocks at a discounted price.
Fortis grows through a combination of acquisitions and internal development projects. The current $26 billion capital program is expected to boost the rate base from $39 billion in 2024 to $53 billion in 2029. As the new assets are completed and go into service, the jump in earnings should support planned annual dividend increases of 4% to 6% over the coming five years. Fortis has other projects under consideration that could be added to the pipeline. Lower interest rates might also spur a wave of consolidation in the utility sector.
Fortis raised the dividend in each of the past 51 years. At the time of writing, the stock offers a 3.8% dividend yield. This is lower than yields available from other stocks, but the regular dividend growth quickly raises the return on the initial investment and pushes the share price higher over the long run.
Enbridge
Enbridge (TSX:ENB) is best known for its extensive oil and natural gas transmission pipeline infrastructure, which moves roughly 30% of the oil produced in Canada and the United States and about a fifth of the natural gas used by American homes and businesses.
In recent years, however, the company has diversified its assets through a series of acquisitions including a wind and solar developer, an oil export terminal, and natural gas distribution utilities. Enbridge is also a partner in the Woodfibre liquified natural gas (LNG) export terminal being built on the coast of British Columbia.
While still classified as a pipeline stock by many investors, Enbridge deserves to be lumped in with the utility sector. The company’s US$14 billion purchase of three American natural gas distribution businesses in 2024 made it the largest natural gas utility operator in North America. Revenue from these assets is rate-regulated, meaning cash flow tends to be predictable and reliable.
Enbridge is working on a $28 billion capital program that will drive earnings growth over the medium term. This should support ongoing dividend increases. The board 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 6.1%.
In an effort to reduce reliance on the United States for oil and natural gas sales, Canada is considering building new major pipeline projects to the three coasts to tap international markets. Enbridge would potentially be a partner on one or more of these projects, driving additional growth.
The bottom line
Fortis and Enbridge pay attractive dividends that should continue to grow. If you have some cash to put to work in a portfolio focused on passive income, these stocks deserve to be on your radar.
