Canadian savers are searching for top TSX stocks to add to their self-directed Registered Retirement Savings Plan (RRSP) portfolios, focused on dividend income and long-term total returns.
In the current conditions where rising inflation could trigger an economic downturn, it makes sense to search for companies that can generate strong cash flow to support ongoing dividend increases, even if the economy slips into a recession.
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Fortis
Fortis (TSX: FTS) owns and operates power generation facilities, electricity transmission networks, and natural gas distribution utilities primarily located in Canada and the United States.
Companies and households need power and natural gas regardless of the state of the economy. As such, Fortis should be a good defensive stock to own during an economic downturn.
Fortis is currently working on a $28.8 billion capital program to drive revenue and earnings higher over the next five years. Management plans to use part of the boost in cash flow to pay dividend increases of 4% to 6% through 2030. Fortis raised the dividend in each of the past 52 years.
Canadian Natural Resources
Canadian Natural Resources (TSX: CNQ) is a giant in the Canadian energy patch with extensive production and reserves. The company’s diverse assets include oil sands, heavy and light conventional oil, offshore oil, natural gas liquids, and natural gas operations.
CNRL’s size and strong balance sheet enable it to make strategic acquisitions when commodity prices fall. It then reaps the rewards from the added output and reserves on the rebound in prices. CNRL is adept at allocating capital around the portfolio to take advantage of positive movements in commodity prices. The drop in the price of oil in recent weeks has led to a pullback in the share price. CNRL remains very profitable, however, even at current prices, supported by low breakeven points across its operations.
At the time of writing, CNQ trades near $56 compared to the 2026 high around $70. Investors who buy at this level can pick up a dividend yield of 4.5%. CNRL has increased the dividend for 26 consecutive years.
Enbridge
Enbridge (TSX: ENB) trades near $78 per share compared to $48 two years ago. Despite the big rebound off the 2022 and 2023 pullback, the stock still provides a dividend yield of close to 5%.
Enbridge continues to grow through acquisitions and capital projects. In recent years, management diversified the asset base through several deals that complement the core oil and natural gas pipeline infrastructure. Enbridge purchased an oil export terminal in Texas for US$3 billion and spent US$14 billion to buy three American natural gas utilities. The company also bulked up the renewable energy division through the acquisition of the third-largest U.S. solar and wind developer.
Enbridge’s large presence in the United States provides extensive revenue in U.S. dollars and is attractive for investors who want to own companies that are unlikely to be negatively impacted by ongoing trade negotiations between Canada and the U.S.
Enbridge’s secured capital program is currently $40 billion. As the new assets are completed and go into service, the boost to cash flow should support ongoing dividend increases. Enbridge raised its distribution in each of the past 31 years.
The bottom line
Fortis, CNRL, and Enbridge pay attractive dividends that should continue to grow. If you have some cash to put to work in a buy-and-hold RRSP focused on dividends, these stocks deserve to be on your radar.
