Canadian investors are looking to take advantage of pullbacks to add top TSX dividend stocks to their self-directed Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP) portfolios focused on dividend income and long-term capital gains.
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Enbridge
Enbridge (TSX:ENB) trades near $66 per share at the time of writing, compared to $70 at the end of the third quarter (Q3) last year. The stock is up in recent days as bargain hunters moved in after the share price slipped below $63, pushing the dividend yield above 6%.
Enbridge is best known for its oil and natural gas transmission pipelines. The company moves roughly 30% of the oil produced in Canada and the United States and about 20% of the natural gas used by American homes and businesses.
Political and public resistance to the construction of new large oil and gas pipelines forced Enbridge to pivot its growth strategy in recent years. The company expanded into the export business through its purchase of an oil export terminal in Texas. On the natural gas side, Enbridge is a partner on the Woodfibre liquefied natural gas (LNG) export terminal being built in British Columbia.
Utilities now make up a larger part of the revenue mix, as well. Enbridge spent US$14 billion in 2024 to buy three natural gas utilities in the United States. The deal made Enbridge the largest natural gas utility operator in North America. These assets, when combined with the core natural gas transmission network, position Enbridge to benefit from the anticipated surge in natural gas demand as new gas-fired power generation facilities are built to supply power to AI data centres.
Enbridge also bulked up its renewable energy division through the acquisition of an American solar and wind developer. Tech companies prefer to source some of their data centre electricity from renewable sources. This is leading to the construction of new solar and wind projects in areas where new data centres are being built.
Growth
The broadening of the asset base has led to diversified revenue streams while opening opportunities for growth projects. Enbridge is currently working on a $35 billion secured capital program. Management expects to see adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rise by 5% annually starting in 2027 as the new assets are completed and go into service. This should support ongoing dividend increases. Enbridge raised its distribution in each of the past 31 years.
In Canada, the desire to reduce reliance on the United States for energy sales could lead to new oil and natural gas pipelines being built to carry production to the coast for shipment to international buyers. If new capacity gets the green light, Enbridge would potentially be a partner on the projects, given its expertise in the sector.
Additional acquisitions are also possible as the industry consolidates. Enbridge has the size and balance sheet strength to pursue large deals.
Risks
Increased oil production from Venezuela could eventually replace some supplies that are currently flowing along Enbridge’s network from Canada to refineries on the U.S. Gulf Coast. Investors will want to keep an eye on Enbridge’s updates on the situation in the coming quarters.
The bottom line
Near-term volatility is expected, but Enbridge pays an attractive dividend that should continue to grow. If you have some cash to put to work in a portfolio focused on dividend income, this stock deserves to be on your radar today.
