With the TSX hitting new records, Canadian pensioners are wondering which dividend stocks are still attractive to buy for a self-directed Tax-Free Savings Account (TFSA) focused on generating reliable passive income.
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Enbridge
Enbridge (TSX: ENB) is up 22% in the past year and currently trades close to the 12-month high. Despite the big rally, ENB stock still offers a 5.8% dividend yield.
The recovery in the share price actually started about two years ago when the Bank of Canada and the U.S. Federal Reserve sent a signal to the markets that they were done raising interest rates in their battle to get inflation under control.
Enbridge uses debt to fund a good chunk of its growth program, including capital projects and acquisitions. The sharp rise in rates in Canada and the U.S. triggered concerns among investors that the jump in debt costs would potentially lead to a dividend cut. Enbridge’s share price actually fell from $58 in June 2022 to $44 in October 2023 before starting the recovery that picked up steam in the second half of 2024 as the central banks cut rates.
The sensitivity to interest rates is important for investors to keep in mind when considering pipeline, utility, and communication stocks.
Canada and the U.S. have put further rate cuts on hold in recent months as the central banks wait to get a better picture of how tariffs are impacting inflation and economic activity. Analysts, however, widely expect the central banks to resume rate cuts before the end of the year. Inflation remains under control, and there are signs that the economy might need some support in 2026. Additional rate cuts should be positive for Enbridge.
The company continues to make strategic investments to drive long-term growth. Enbridge purchased three American natural gas utilities in 2024 for US$14 billion. In addition, the company is working on a $32 billion capital program. The boost to revenue and cash flow from the new assets should support ongoing dividend growth. Enbridge raised the dividend in each of the past 30 years.
Telus
Telus (TSX: T) trades near $22.80 at the time of writing compared to $19.50 at the start of the year, but is still way off the $34 it fetched at the high point in 2022.
Soaring interest rates are to blame for the initial pullback that occurred in the second half of 2022 and through most of 2023. Telus carries a lot of debt, so the rate hikes drive up interest expenses on variable-rate loans and make borrowing additional money more expensive. Price wars among communications providers and revenue declines at the Telus International (Telus Digital) subsidiary in 2024 led to the continued slide in the stock price.
Bargain hunters have moved into the stock in 2025 on the hopes that the worst of the pain is in the rearview mirror. Telus plans to take Telus Digital private and recently announced a deal to sell a stake in its cell towers to reduce its debt load. Prices on Canadian mobile and internet plans have increased across the sector this year, so this should result in better margins.
Fewer newcomers to Canada, regulatory uncertainty, and a possible recession remain headwinds for the communications providers, but most of that might already be priced into the Telus share price.
Investors who buy the stock at the current level can pick up a dividend yield of 7.3%.
The bottom line
Enbridge and Telus pay attractive dividends with high yields. If you have some cash to put to work in a TFSA focused on passive income, these stocks deserve to be on your radar.
