Canadian investors who want to know ways to generate passive income have plenty of options to explore. Dividend investing is one of my favourite strategies to unlock the ability to generate passive income. Building a self-directed portfolio of dividend stocks in a Tax-Free Savings Account (TFSA) can let you keep all of the returns you generate because you make contributions to the account using after-tax dollars.
This year has not been the easiest to understand how to navigate the stock market. The US-Iran war and its impact on global markets is making it challenging to make investment decisions you can fully back. However, even volatile market environments leave opportunities for investors who know where to look.
Today, I will discuss two TSX stocks that can be worth buying and holding through the crisis and beyond.
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Enbridge
Enbridge Inc. (TSX: ENB) is a $171.2 billion market-cap giant in the Canadian energy industry. The energy infrastructure company services the oil and gas industry, providing the necessary infrastructure to transport almost a third of the oil produced in North America. The company’s network of natural gas pipelines moves around a fifth of the natural gas consumed in the US.
Recent years have seen Enbridge grow its presence in America to leverage trends in the energy industry. One of its most significant moves was becoming one of the biggest natural gas utility providers in America through its US$14 billion acquisition of natural gas utilities in the US.
As of this writing, Enbridge stock trades for $78.38 per share and boasts a 31-year dividend-growth streak. It pays its investors $0.97 per share each quarter, translating to a 5% dividend yield. ENB can be a good investment at current levels.
Fortis
Fortis Inc. (TSX: FTS) is another stock that banks on the reliability of being in the utilities sector. Unlike Enbridge, Fortis does not engage in servicing the energy industry to transport crude and natural gas. Fortis is a utilities holding company with a $40.8 billion market capitalization. It is a pure play in the utilities sector, operating several electric and natural gas utility businesses across Canada, the US, and the Caribbean.
Most of its revenue comes from long-term contracted assets in these rate-regulated markets, translating to reliable, strong, and predictable cash flows that it can use to fund dividend growth and capital programs. No matter how bad the economy gets, people need their utilities, and that essentially secures the company’s ability to generate healthy cash flows.
As of this writing, it trades for $80.22 per share, and boasts a 3.2% dividend yield and a dividend-growth streak that spans more than half a century. It can be a good long-term investment to consider.
Foolish takeaway
Fortis and Enbridge are two excellent examples of stocks that pay attractive dividends and have the ability to continue growing in the long run. The defensive nature of the underlying businesses makes it easier to have more faith in the stock of Fortis and Enbridge. No matter how bad the economy gets, these two are the kind of businesses that provide essential services regardless. This means the stocks have the ability to continue sustaining reliable distributions.
If you have contribution room available in a TFSA, I would advise allocating some of it to hold shares of Fortis stock and Enbridge stock.
