Income investors are searching for good TSX dividend stocks to buy for a self-directed Tax-Free Savings Account (TFSA).
The size and the extent of pullbacks are nearly impossible to predict, but dips always arrive and are opportunities to get a better initial yield on top Canadian dividend payers while you wait for the next rebound.
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Enbridge
Enbridge (TSX: ENB) trades near $78 right now compared to $80 last month. The small slide has pushed the dividend yield back to the 5% level, which is attractive today for income investors.
Enbridge continues to expand through a combination of strategic acquisitions and organic projects. In the past five years, the company acquired an oil export terminal in Texas for US$3 billion and three American natural gas utilities for US$14 billion. Enbridge also bought the third-largest wind and solar developer in the United States to bulk up its renewables group.
On the development side, Enbridge has a $40 billion secured capital program underway that will help boost revenue and earnings over the next few years. Distributable cash flow is expected to increase by 5% annually over the medium term. That should enable the board to steadily raise the dividend. Enbridge has increased the distribution in each of the past 31 years.
Rising demand for North American oil and natural gas, both from international buyers and domestic users, bodes well for Enbridge. New pipeline and export infrastructure will be needed to move oil and gas to the coast where it can be shipped to global buyers. Enbridge is already a partner on the Woodfibre liquified natural gas export facility being built on the coast of British Columbia and is connecting its transmission system to an LNG site on the Gulf Coast in the United States.
The stock could, however, face new headwinds if the Bank of Canada and the U.S. Federal Reserve are forced to raise interest rates later this year or in 2027 to keep inflation under control. If rate hikes cause the stock to pull back, as they did in 2022 and 2023, investors should view the dip as an opportunity to add to their positions.
Fortis
Fortis (TSX: FTS) is another utility company that owns natural gas distribution businesses. It also operates power generation facilities and electricity transmission grids.
As with Enbridge, Fortis saw its share price come under pressure during the last round of rate hikes by the Canadian and American central banks. New rate increases would likely cause the stock to give back some of the gains it racked up over the past two years.
Fortis has a $28.8 billion capital program underway. As the new assets are completed and go into service, the company expects the increase in cash flow to be able to support planned annual dividend growth of 4% to 6% through at least 2030. Fortis raised the dividend in each of the past 52 years, so the guidance should be solid.
Management has additional projects under consideration that could be added to the growth program in the next few years. There is also the potential for Fortis to participate in the expansion of Canada’s electricity infrastructure as the country looks to build a national power grid as part of its overall plan to become an energy superpower.
The bottom line
Enbridge and Fortis pay good dividends that should continue to grow. If you are searching for companies to buy on pullbacks, these stocks deserve to be on your radar.
