The share prices of many top TSX stocks are near record highs and, in some cases, valuations are stretched.
With economic headwinds potentially on the way, investors are wondering which Canadian dividend stocks are still good to own for a self-directed Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP) portfolio focused on dividends and total returns.
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TC Energy
TC Energy (TSX: TRP) has increased its dividend for 26 consecutive years. The latest increase of 3.2% brings the annualized payout to $3.51 per share. At the current price, this provides investors with a yield of 3.6%.
TC Energy is up nearly 100% in the past two years. The stock’s recovery is a relief for long-term holders who watched it go through a rough patch in 2022 and 2023 when the shares dropped from $74 to $45 during the period the Bank of Canada and the U.S. Federal Reserve were aggressively raising interest rates.
New enthusiasm for the stock came as TC Energy completed two major pipeline projects and monetized non-core assets to pay down extra debt the company had to take on to finish the Coastal GasLink pipeline that carries natural gas to the new LNG Canada export facility.
TC Energy and LNG Canada are now looking at an expansion of CoastalGas Link as global demand for Canadian natural gas is rising. Another potential project the company could participate in would be a new pipeline that carries natural gas to Churchill as part of a broader plan to export liquified natural gas (LNG) to Europe.
The current capital program is expected to run about $6 billion per year over the medium term. As the new assets are completed and go into service, the boost to cash flow should support ongoing dividend increases.
Canadian Natural Resources
Canadian Natural Resources (TSX: CNQ) also has a streak of 26 annual dividend increases. The energy giant is benefitting from the surge in oil prices and expanded capacity to export liquified natural gas to international buyers.
CNRL owns oil sands, conventional light and heavy oil, offshore oil, and natural gas production operations, as well as vast reserves. The company is adept at moving capital around the asset portfolio to take advantage of beneficial movements in commodity prices. CNRL also has the financial firepower to make large strategic acquisitions to drive additional growth.
The combination of rising global demand for Canadian energy and Canada’s new goal of boosting export capacity to offset reliance on the U.S. for energy sales should be positive for CNRL in the coming years. Each new pipeline that gets built will enable CNRL to boost production.
The bottom line
TC Energy and CNRL pay good dividends that should continue to grow, supported by positive trends in the energy sector.
The share prices have enjoyed big rallies this year, so investors should expect some volatility in the near term and new buyers might want to wait for a pullback before starting a position. Over the long run, however, these stocks deserve to be on your radar for a dividend portfolio.
