Canadian investors are searching for reliable dividend stocks to add to their self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolios focused on income and total returns.
In the current market conditions, where the TSX sits near a record high and trade uncertainty remains a threat to the economy, it makes sense to consider companies with strong operations in both the United States and Canada.
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Enbridge
Enbridge (TSX:ENB) is a major player in the North American energy infrastructure industry. The company’s oil pipelines carry nearly a third of the oil produced in Canada and the United States. The natural gas transmission network moves roughly 20% of the natural gas used by American homes and businesses.
Enbridge significantly expanded its presence in the United States in recent years to take advantage of emerging trends in the energy sector. The company bought an oil export terminal in Texas, purchased the third-largest American solar and wind project developer, and spent US$14 billion in a deal to acquire three American natural gas utilities.
Enbridge is currently working through a $40 billion capital program that is spread out across the different divisions. As the new assets get completed and go into service, the boost to distributable cash flow is expected to be about 5% annually over the medium term. This should enable Enbridge to continue raising the dividend. The board has increased the distribution in each of the past 31 years.
Investors who buy ENB stock at the current level can pick up a dividend yield of 5%.
Fortis
Fortis (TSX:FTS) is a utilities company with businesses primarily located in Canada and the United States. These include power generation facilities, electricity transmission networks, and natural gas distribution utilities.
Demand for electricity is rising in both Canada and the United States as hundreds of new AI data centres are being built by tech companies. Investments in grid upgrades and new gas-fired power generation facilities are needed to accommodate the growth. This bodes well for Fortis due to its strength in these areas.
The current capital program of $28.8 billion is already expected to increase the rate base by 7% per year through 2030. Revenue and profits generated by the new assets should support the planned 4% to 6% annual dividend growth.
Fortis has increased the dividend for 52 consecutive years. At the time of writing, the dividend yield is 3.3%.
Canada’s plan to build a national power grid could provide an opportunity for Fortis to significantly increase its capital program. The company has expertise in grid construction and management and already operates assets in five provinces.
The bottom line
Enbridge and Fortis are good examples of stocks that pay attractive dividends that should continue to grow. Both companies have significant operations in the United States and provide essential services that are required regardless of the state of the economy.
If you have some cash to put to work in a buy-and-hold dividend portfolio, these stocks deserve to be on your radar.
