Canadian investors are searching for good TSX dividend stocks to add to their self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolios focused on generating income and total returns.
With stock markets near record highs and soaring oil prices threatening to trigger an economic downturn, it makes sense for investors to consider companies that can ride out economic turbulence and maintain their dividend payments.
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Enbridge
Enbridge (TSX: ENB) is a major player in the North American energy infrastructure and utilities sectors. The company’s oil pipelines move nearly a third of the oil produced in Canada and the United States. Its natural gas transmission network carries about 20% of the natural gas used by American homes and businesses. Enbridge is also the largest operator of natural gas utilities in North America.
The company is taking advantage of rising international demand for Canadian and U.S. natural gas, as well. Enbridge purchased an oil export terminal in Texas and is a partner on the Woodfibre liquefied natural gas (LNG) export terminal being built on the coast of British Columbia.
Looking ahead, Enbridge would be a good candidate to participate in any new major pipeline projects in Canada that get approval for construction in the next few years to meet the government’s goal of diversifying away from reliance on energy sales to the United States.
In the meantime, Enbridge is working on a $39 billion capital program that will help drive earnings and distributable cash flow growth in the next few years. This should support ongoing dividend increases. Enbridge raised the distribution in each of the past 31 years. Investors who buy ENB stock at the current price can get a dividend yield of 5.4%.
Fortis
Fortis (TSX: FTS) is another top Canadian dividend stock that should be good to hold through a recession. The board has increased the dividend annually for 52 consecutive years.
Fortis operates natural gas distribution utilities, power generation facilities, and electricity transmission networks in Canada, the United States, and the Caribbean. These are primarily rate-regulated businesses, which means cash flow is normally predictable and reliable. Households and companies need to use natural gas and electricity, regardless of the state of the economy
Fortis is working on a $28.8 billion capital program that is expected to raise the rate base by an average of 7% per year through 2030. This should drive enough cash flow growth to support planned annual dividend hikes of 4% to 6% over the next five years.
Royal Bank
Royal Bank (TSX: RY) has a current market capitalization near $340 billion, making it the largest company on the TSX based on that metric. The banking giant is a profit machine, generating adjusted net income of $5.9 billion in the most recent quarter, up 12% from the same period the previous year.
Royal Bank’s adjusted return on equity of 17.8% makes it the envy of many global peers. The bank has a strong capital position that enables it to ride out turbulent times while also maintaining the financial firepower to make strategic acquisitions that might become available. Royal Bank has paid a dividend to investors every year since 1870.
The bottom line
Enbridge, Fortis, and Royal Bank pay solid dividends that should continue to grow. If you have some cash to put to work in a dividend portfolio, these stocks deserve to be on your radar.
