Canadian pensioners are searching for ways to get better returns on their savings. One popular strategy involves owning high-yield TSX dividend stocks inside a self-directed Tax-Free Savings Account (TFSA).
In the current environment, with markets at record highs, it makes sense to search for stocks that have long histories of delivering steady dividend growth during economic downturns, as well as through periods of economic expansion.
Enbridge
Enbridge (TSX:ENB) trades near $67 per share at the time of writing. The stock recently topped $70 and is up about 19% over the past year. Despite the rally, investors can still get a dividend yield of 5.6% at the current price.
Enbridge is a giant in the North American energy infrastructure industry. The company moves approximately 30% of the oil produced in Canada and the United States and 20% of the natural gas used by American businesses and households.
Management spent the past few years shifting growth capital to take advantage of emerging opportunities. Enbridge purchased an oil export terminal in Texas and is a partner on the Woodfibre liquified natural gas (LNG) export facility being built on the coast of British Columbia. In addition, Enbridge bulked up its wind and solar development business and recently acquired three natural gas utilities in the United States. The diversification of the assets from the legacy oil and natural gas transmission operations provides a more balanced revenue stream and presents opportunities for new growth projects.
Enbridge is currently working on a $32 billion capital program that should help drive steady growth in distributable cash flow over the medium term to support ongoing dividend hikes. Enbridge raised the distribution to shareholders in each of the past 30 years.
As Canada looks to expand its energy exports to global buyers, Enbridge could potentially be a partner on any new major oil pipelines that get approved to move oil from producers in Alberta to the coast. At the same time, Enbridge is positioned well to continue expanding its presence in the American energy sector.
Canadian Natural Resources
Weak oil prices over the past year have pushed down the stock prices of oil producers. Canadian Natural Resources (TSX:CNQ), for example, trades near $45 per share at the time of writing compared to more than $55 at one point last year.
Investors can take advantage of the pullback to pick up a 5.2% dividend yield from CNQ right now.
CNRL is a major player in the Canadian oil and gas sector with extensive production and reserves. The company operates oil sands, heavy and light conventional oil, and offshore oil sites. CNRL is also a significant producer of natural gas.
The expansion of LNG export capacity in Canada will enable CNRL to sell more natural gas to international buyers in the coming years. Gas prices are currently low in Canada due to a glut of supply, but the market will eventually stabilize, and global prices for LNG are usually higher than the price producers get by selling gas to the United States.
New oil pipeline capacity would also benefit CNRL, whether it comes in the form of a new pipeline to the Canadian coast or extra capacity to the United States via a revived Keystone XL project, which has recently come up for discussion between Canada and the U.S. as part of ongoing trade negotiations.
CNRL has a strong balance sheet to ride out low energy prices and has the financial firepower to make large acquisitions to drive growth. This is largely why the board has been able to raise the dividend annually for the past 25 years.
The bottom line
Near-term market volatility should be expected. However, Enbridge and CNRL 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.
