Seniors who want reliable passive income and younger investors focused on total returns are wondering which top TSX dividend stocks might still be good to buy for a self-directed Tax-Free Savings Account (TFSA).
With the TSX near its record high and economic conditions potentially headed for some turbulence, it makes sense to look for companies that are market leaders and have delivered steady dividend growth through various economic cycles.
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Enbridge
Enbridge (TSX: ENB) is a good example of a leading Canadian dividend stock that investors can rely on for generating passive income and long-term total returns. The board has increased the dividend for 30 consecutive years, supported by growth in revenue and cash flow.
Enbridge is one of Canada’s largest companies with a current market capitalization of more than $140 billion. The energy infrastructure giant’s energy transmission assets move roughly 30% of the oil produced in Canada and the United States and about 20% of the natural gas consumed by American businesses and households.
Last year, Enbridge spent US$14 billion to buy three natural gas utilities in the United States. These assets complement the existing transmission network and set Enbridge up to benefit from the expected surge in natural gas demand as new gas-fired power generation facilities are built to deliver electricity to power-hungry AI data centres.
Enbridge bulked up its renewable energy division when it purchased the third-largest American wind and solar developer. The company recently announced a large solar facility deal that will provide power to a single AI data centre client. Enbridge is also a partner on large offshore wind projects in Europe.
International demand for North American energy is on the rise as countries seek out reliable supplies from stable producers. Enbridge expanded into energy exports in recent years to capture part of this opportunity through its acquisition of an oil export terminal in Texas and its stake in the Woodfibre liquified natural gas export facility (LNG) being built in British Columbia.
The move to diversify the asset base over the past few years has enabled Enbridge to generate a more balanced revenue stream with a higher component coming from rate-regulated utilities that tend to deliver predictable and reliable cash flow.
Looking ahead, Enbridge could benefit from Canada’s renewed interest in building new major energy infrastructure to get oil and natural gas to export facilities on the coast. Previous attempts failed due to regulatory hurdles and opposition from various stakeholders, but there is a new sense of urgency to reduce Canada’s reliance on the United States for sales of energy products. If the obstacles to building new major oil and natural gas pipelines are removed, Enbridge would be a good candidate to participate in the projects.
In the meantime, Enbridge is working on a $32 billion capital program that is expected to boost distributable cash flow by about 5% per year over the medium term. This should support ongoing dividend increases. Investors who buy ENB stock at the current price can get a dividend yield of 5.7%.
The bottom line
Near-term volatility is expected in the broader market, so some downside could be on the way for ENB on a market pullback. Any weakness would be viewed as an opportunity for ENB investors to add to the position.
Enbridge pays an attractive dividend that should continue to grow. If you have some cash to put to work, this stock deserves to be on your radar.
