Canadian pensioners and other income investors are searching for high-yield dividend stocks to add to their self-directed Tax-Free Savings Account (TFSA) portfolios.
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Enbridge
Enbridge (TSX:ENB) has been on a solid run for the past two years, rising roughly 50% over that timeframe. Although the easy money has likely already been made, investors seeking a steady stream of passive income can still get a dividend yield of 5% from the stock.
Enbridge diversified its asset portfolio in recent years through a series of acquisitions in the United States. The company spent US$3 billion to buy an oil export terminal in Texas. That move has proven to be a savvy one as global demand for North American oil is on the rise.
Enbridge also acquired three natural gas utilities for US$14 billion in 2024. Those deals complement Enbridge’s natural gas pipeline and storage network, which already carries 20% of the natural gas used by American homes and businesses. Natural gas demand is expected to surge in the next few years as gas-fired power generation facilities are built to supply electricity to new AI data centres.
In addition, Enbridge purchased a solar and wind project developer in the United States. Tech firms are contracting the division to supply clean energy to help power their facilities housing new data centre hardware.
Growth through capital investment is also occurring. Enbridge has a $40-billion secured development backlog with investments across the various business lines, including exports, pipelines, utilities, and renewable energy. For example, the company is a partner in the Woodfibre liquified natural gas (LNG) export facility that is near completion on the coast of British Columbia.
Canada’s plan to become an energy superpower while increasing energy exports to global buyers should bode well for Enbridge in the coming years. Demand for shipping oil and natural gas along its existing infrastructure will remain strong. At the same time, the company has the expertise and the financial clout to participate in new projects that might get the green light.
Enbridge raised the dividend in each of the past 31 years. Distribution growth should continue, supported by the large capital program.
BCE
BCE (TSX:BCE) is a contrarian pick right now. The company slashed its dividend by more than 50% last year and the stock price is down to $30 per share from $74 in 2022.
Rising borrowing costs, an elevated debt level, and price wars in the Canadian communications market have all contributed to the pain. A drop in newcomers to the country, particularly students, has also impacted the sale of new devices and service subscriptions.
That being said, most of the pain should now be priced into the shares and BCE is working on building growth through new ventures. The company purchased an internet services business in the United States, where there are strong prospects for expansion. BCE is also providing sovereign AI data centre services to Canadian government and corporate clients that want to ensure their data remains on Canadian soil.
It will take time for the turnaround efforts to deliver results, and investors likely won’t see a dividend increase until debt levels are reduced. That being said, the reduced dividend payment should be safe. BCE stock offers a decent 5.8% dividend yield at the current share price.
The bottom line
Enbridge and BCE pay dividends with attractive yields. If you have some cash to put to work in a TFSA focused on generating high-yield passive income, these stocks deserve to be on your radar.
