Retirees and other income investors are searching for good Canadian dividend stocks to add to their self-directed Tax-Free Savings Account (TFSA) portfolios. With the TSX at a record high and tariffs causing economic uncertainty, it makes sense right now to consider industry leaders with solid track records of delivering dividend growth.
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TC Energy
TC Energy (TSX: TRP) is a major player in the North American energy infrastructure industry with power generation and natural gas transmission and storage assets in Canada, the United States, and Mexico.
TC Energy spent the past couple of years wrapping up two large pipeline projects that will help drive revenue and cash flow expansion. The 670 km Coastal GasLink pipeline that brings natural gas from producers in Western Canada to a new liquified natural gas (LNG) export facility in British Columbia cost roughly $14.5 billion, more than double the original budget. TC Energy had to take on extra debt to get the pipeline finished, but management has done a good job of monetizing non-core assets to shore up the balance sheet.
In Mexico, TC Energy recently completed its 715 km Southeast Gateway pipeline. This project actually came in 13% under budget and was completed in fewer than three years.
Natural gas demand is expected to grow in the coming years as new gas-fired power generation facilities are built to provide electricity for AI data centres. Exports are also forecast to increase as new LNG export facilities are completed. TC Energy’s extensive natural gas transmission infrastructure puts it in a good position to benefit.
TC Energy is targeting annual capital investments of $6 billion to $7 billion. This should support planned annual dividend increases of 3% to 5%. TC Energy raised the dividend in each of the past 25 years. Investors who buy TRP stock at the current price can pick up a dividend yield of 5%.
Fortis
Fortis (TSX: FTS) operates natural gas distribution utilities, electricity transmission networks, and power-generation facilities in Canada, the United States, and the Caribbean.
The company has a $26 billion capital program on the go that 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 increase in revenue and cash flow should enable the board to meet its goal of raising the dividend by 4% to 6% per year over the next five years. Fortis has other projects under consideration that could get added to the development plan to extend the dividend-growth outlook or boost the size of the increases.
Fortis raised the dividend in each of the past 51 years. At the time of writing, the stock provides a dividend yield of 3.6%.
As Canada looks to build new east-west energy pipelines and electricity grids, TC Energy and Fortis could both potentially play key roles in those projects.
The bottom line
TC Energy and Fortis pay attractive dividends that should continue to grow. If you have some cash to put to work in a TFSA focused on passive income, these stocks deserve to be on your radar.
