Canadian pensioners are constantly looking for Tax-Free Savings Account (TFSA) investments that can boost the income they earn on their money without taking on too much capital risk.
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GIC’s or dividend stocks
Rates offered on Guaranteed Income Certificates (GICs) are in the range of 3% to 4% right now. That’s not bad for a risk-free return with inflation currently below 3%. To get the highest GIC rates, however, investors need to lock-up the funds for several years. This might not be ideal for people who might need access to their invested capital to pay for an unplanned expense.
Investors who need more liquidity and are searching for a higher return might prefer to own top TSX dividend stocks. Each increase in the distribution raises the yield on the initial investment, while stocks can be sold at any time to access the funds. Share prices, however, can fall below the purchase price. In addition, dividends can be reduced or eliminated if the company gets into financial trouble.
In the current market environment, it makes sense to look for dividend stocks that have long track records of delivering dividend growth through challenging economic conditions.
Enbridge
Enbridge (TSX: ENB) is a giant in the North American energy infrastructure and utilities sectors with a current market capitalization above $170 billion.
The company’s oil and natural gas pipelines and transmission infrastructure move roughly a third of the oil produced in Canada and the United States, and a fifth of the natural gas used by American homes and businesses. The company also owns the largest oil export terminal in Texas and is a partner on the Woodfibre liquified natural gas (LNG) facility nearing completion on the coast of British Columbia. In addition, Enbridge builds and operates wind and solar assets and is the largest player in the North American natural gas utilities sector.
Energy demand in North America and across the globe is rising. International buyers are seeking reliable supplies of oil and LNG from Canada and the United States. Domestic use is also on the upswing, especially for natural gas, as gas-fired power plants are being built to supply electricity for new AI data centres.
Enbridge is working on a $40 billion capital program that will boost revenue and earnings in the next few years. Management expects to deliver 5% annual growth in distributable cash flow. This should support ongoing dividend growth. Enbridge raised the dividend in each of the past 31 years.
Investors who buy ENB at the current price can pick up a dividend yield around 4.9%.
Enbridge has the financial clout to make large strategic acquisitions to drive additional growth. The company is also positioned well to play a role in the anticipated expansion of oil and natural gas infrastructure in Canada as the country moves toward its new goal of becoming an energy superpower.
The bottom line
Enbridge is a good example of a dividend-growth company that offers an attractive yield. If you have some cash to put to work in a portfolio focused on dividend income, this stock deserves to be on your radar.
