Canadian retirees and other income investors are wondering which TSX dividend stocks might be attractive right now to add to a self-directed Tax-Free Savings Account (TFSA) portfolio.
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Telus
Telus (TSX:T) is arguably a contrarian pick. The communications player recently slashed its dividend by 55% and the stock is currently trading near a level not seen for 15 years.
Victor Dodig, the new CEO who took over the top in July, is hitting the reset button to get the company back on track. The dividend cut will free up $2.8 billion in cash through 2028, as the company moves to reduce debt. Telus also announced it is taking a $2.1 billion non-cash charge on the Telus Digital operations. This move helps clean up the balance sheet by writing down the value of the division on the books to match the current market reality.
Price competition in the mobile segment, lower immigration, and high borrowing costs will be ongoing headwinds for the core wireless and wireline businesses, but Telus also has some operations with good upside potential. The Telus Health and Telus Agriculture and Consumer Goods subsidiaries are performing well. It is possible that Telus will move to monetize part or all of these divisions to reduce its debt. Telus is also investing in sovereign data centres as government and corporate clients look for solutions to keep their data in the country.
Investors will need to be patient, but the new dividend payment should be safe and currently provides a yield of 5.5%.
Enbridge
Enbridge (TSX:ENB) also offers a 5.5% dividend yield at its current share price near $70. The stock has been on an upward trend for most of the past three years, but recently pulled back from the $80 mark, giving investors who missed the big rally a chance to pick up the stock on a meaningful dip.
Enbridge has a secured capital program of $41 billion on the go that will drive revenue and distributable cash flow higher in the next few years. This should enable the board to raise the dividend at a steady pace. Enbridge increased the distribution in each of the past 31 years. The company’s growth program is spread out across all of its divisions, including pipelines, exports, renewable energy, and natural gas utilities.
Domestic and international demand for Canadian and American oil and natural gas is on the rise. Foreign buyers are seeking reliable supplies for stable countries. At home, new gas-fired power generation facilities are being built to provide electricity to data centres.
Enbridge has a large footprint in the United States, which gives investors good exposure to the American energy sector through a top Canadian stock. At home, the Canadian government’s new plan to become an energy superpower could lead to new infrastructure opportunities for Enbridge, including participation in the construction of additional oil or natural gas pipelines and export facilities. Enbridge is already a partner on the Woodfibre liquified natural gas (LNG) export site nearing completion on the coast of British Columbia.
The bottom line
Telus and Enbridge pay dividends with yields well above the current rate of inflation. If you have some cash to put to work in a TFSA focused on high-yield dividend income, these stocks deserve to be on your radar.
