Retirees and other income investors are wondering which top TSX dividend stocks might be good to add to a self-directed Tax-Free Savings Account (TFSA) heading into next year.
With the market near its record high and economic headwinds potentially on the horizon, it makes sense to consider stocks that can deliver steady dividend growth through turbulent times.
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Fortis
Fortis (TSX:FTS) is a Canadian utility company with $75 billion in total assets primarily located in Canada and the United States. Businesses include power generation facilities, electricity transmission networks, and natural gas distribution utilities.
Fortis gets most of its revenue from rate-regulated assets that supply essential products and services. Households and companies need to use power and natural gas, regardless of the state of the economy. This means Fortis should be a relatively sound defensive stock to own through an economic downturn.
Fortis grows through a combination of strategic acquisitions and development projects. The company has not completed a major purchase in several years, but Fortis is working on a $28.8 billion capital program that is expected to raise the rate base by a compound annual rate of about 7% over five years. Additional projects are under consideration that could be added to the backlog. At the same time, the decline in interest rates over the past year could start to make acquisitions more attractive in the utility sector.
As projects are completed and the assets go into service, the extra revenue and profits should support planned annual dividend increases in the 4% to 6% range through 2030. This is good guidance in an uncertain economic climate.
Fortis raised its dividend in each of the past 52 years. Investors who buy FTS stock at the current level can get a dividend yield of 3.7%.
Enbridge
Enbridge (TSX:ENB) recently raised its dividend by 3%, marking 31 consecutive years of dividend increases. The energy infrastructure and utilities giant continues to expand its asset portfolio through large acquisitions and a significant capital program.
Enbridge spent US$14 billion in 2024 to buy three American natural gas utilities. With these deals, Enbridge becomes the largest natural gas utility operator in North America and is positioned to benefit from the anticipated surge in demand for natural gas in the coming years as gas-fired power generation facilities are built to provide electricity for AI data centres.
Enbridge’s extensive natural gas transmission infrastructure already moves roughly 20% of the natural gas used in the United States. In Canada, Enbridge is a partner on the Woodfibre liquified natural gas (LNG) export facility being built on the coast of British Columbia.
Oil infrastructure remains important, as well. Enbridge is expanding its Mainline pipeline system to provide additional capacity. The company is also a key player in the export market after purchasing an oil export terminal in Texas for US$3 billion in 2021.
Enbridge is working on $35 billion in capital projects. The boost to cash flow from these assets and recent acquisitions should drive steady growth in distributable cash flow in the next few years. Investors who buy ENB stock at the current level can pick up a dividend yield of 6%.
The bottom line
Fortis and Enbridge pay attractive dividends that should continue to grow. The stocks are off their 12-month highs, providing investors who missed the rallies this year with a chance to buy a dip. If you have some cash to put to work in a portfolio focused on dividend income, these stocks deserve to be on your radar.
