Canadian pensioners are searching for good dividend stocks to add to their self-directed Tax-Free Savings Account (TFSA) focused on generating reliable and growing passive income.
The TSX is hitting record highs while economic uncertainty looms amid tariff threats. In this market environment, it makes sense to look for industry leaders that have solid track records of delivering dividend growth through the full economic cycle.
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TC Energy
TC Energy (TSX:TRP) raised its dividend in each of the past 25 years. Investors who buy TRP stock at the current price can get a dividend yield of 5.25%.
TC Energy is focused on growing its natural gas transmission and power production operations after spinning off the oil pipelines division last year. Management has done a good job of monetizing non-core assets to reduce extra debt taken on to get the Coastal GasLink project completed after delays and soaring supply costs more than doubled the initial budget to roughly $14.5 billion. The 670 km pipeline is now operational, carrying natural gas from Canadian producers to the new LNG Canada export facility in British Columbia.
In Mexico, TC Energy recently completed its 715 km Southern Gateway pipeline. This project came in under budget by 13%. The pipeline will move natural gas from production sites in Mexico to supply new gas-fired power generation facilities.
TC Energy has an ongoing capital program that is expected to be around $6 billion per year over the medium term. Revenue growth from the newly completed assets and those being built should support steady dividend growth in the coming years.
Fortis
Fortis (TSX:FTS) is a natural gas utility with $75 billion in assets spread out across Canada, the United States, and the Caribbean. The businesses include power generation facilities, natural gas distribution utilities, and electric transmission networks. Fortis gets most of its revenue from rate-regulated assets. This means cash flow should be predictable and reliable.
The company has historically grown through a combination of acquisitions and internal projects. Lower interest rates are expected in the U.S. and Canada later this year or in 2026. That could spark a new round of consolidation in the utility sector. On the development side, Fortis is working through a $26 billion capital program that will increase the rate base from $39 billion in 2024 to $53 billion in 2029. The resulting jump in cash flow should enable the board to meet its goal of raising the dividend by 4% to 6% annually over the next five years. Fortis has other projects under consideration that could get the green light to drive additional growth.
The board raised the dividend in each of the past 51 years. Investors can currently get a dividend yield of 3.7%.
The bottom line
TC Energy and Fortis could both benefit from Canada’s emerging plan to build coast-to-coast energy infrastructure, including pipelines and power grids. Even if those projects do not materialize, the companies still have solid backlogs of capital developments to drive growth.
If you have some cash to put to work in a TFSA focused on passive income, these stocks deserve to be on your radar.
