Retirees and other dividend investors are searching for good stocks to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on generating reliable and growing passive income.
With the TSX near its record high and economic uncertainty on the horizon, it makes sense to look for stocks with long track records of dividend expansion through the full economic cycle.
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Enbridge
Enbridge (TSX: ENB) has been on an upward trend for the past two years, rising from $46 to the current price above $70 per share. Investors who missed the rally, however, can still get a 5.5% yield on the stock.
Enbridge is a giant in the North American energy infrastructure and utilities sectors. The company moves about 30% of the oil produced in the U.S. and Canada and roughly 20% of the natural gas used by American homes and businesses.
Enbridge’s US$14 billion purchase in 2024 of three American natural gas utilities made Enbridge the largest natural gas utility operator in North America. These businesses, when combined with the existing natural gas transmission and storage assets, position Enbridge to benefit from the anticipated growth in natural gas demand as new gas-fired power-generation facilities are built to provide electricity for AI data centres.
Enbridge has also moved into energy exports in recent years and bulked up its renewable energy group, as well. The diversification of the asset portfolio broadens the revenue stream and opens up more opportunities for expansion.
Enbridge is currently working on a $35 billion capital program that will drive distributable cash flow higher in the next few years. This should support steady dividend growth. Enbridge increased the dividend in each of the past 31 years.
Canada is considering adding oil pipeline capacity to move oil from Alberta to the coast to ship to international buyers. If a major project goes ahead, Enbridge would be a leading candidate to participate.
Fortis
Fortis (TSX: FTS) has given investors a dividend increase for 52 consecutive years. That’s the kind of reliability you want to see when choosing dividend stocks to generate passive income.
Fortis owns power generation, electric transmission, and natural gas utilities that generate nearly all their revenue from rate-regulated assets. This provides a predictable cash flow that helps management plan growth investments. Fortis is working on a $28.8 billion capital program through 2030. As the new assets are completed and go into service, the boost to cash flow should enable the board to meet its goal of raising the dividend by 4% to 6% per year over that timeframe. Other projects are under consideration that could get added to the development program.
As a leader in the Canadian power utilities sector, Fortis could also potentially play a key role in the government’s plans to build a national power grid.
Investors who buy Fortis at the current price can get a dividend yield of 3.5%.
The bottom line
Enbridge and Fortis pay attractive dividends that should continue to grow. If you have some cash to put to work in a TFSA focused on generating passive income, these stocks deserve to be on your radar.
