Canadian investors are searching for good TSX dividend stocks to add to their self-directed Tax-Free Savings Account (TFSA) portfolios focused on generating high-yield passive income.
The recent pullback in the share prices of some top dividend-growth names is finally giving investors who missed the big rally in the past two years a chance to buy a decent dip and pick up better yields than were available just last month.
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Enbridge
Enbridge (TSX: ENB) trades near $69 at the time of writing, compared to $80 a few weeks ago. The drop has pushed the dividend yield back up to 5.6%.
Enbridge recently said it will put the $1.4 billion second phase of the expansion of its Mainline oil pipeline on hold until industry heavyweights commit to investing in production growth to fill the extra 250,000 barrels per day of shipments to the United States. Canadian oil producers want to get more clarity on changes to Canadian energy policy and regulations before making the large investments.
At the same time, rising bond yields are driving up the cost of borrowing to fund new capital projects. This could potentially force Enbridge to delay other projects.
These are short-term headwinds that could put additional pressure on the stock, but buy-and-hold dividend investors should look at the big picture. Enbridge’s total secured capital program is currently $41 billion. The projects are spread out across the various business lines, including pipelines, export facilities, renewable energy, and natural gas distribution utilities. As the new assets are completed and go into service, the increase to distributable cash flow is expected to be about 5% per year over the medium term. This should support steady dividend increases. Enbridge raised the dividend in each of the past 31 years.
TC Energy
TC Energy (TSX: TRP) is another top Canadian energy infrastructure firm. The company owns and operates more than 94,000 km of natural gas pipelines and 650 billion cubic feet of natural gas storage capacity in Canada, the United States, and Mexico.
TC Energy also has power generation assets, and used to operate oil pipelines, as well, but spun off that division in an IPO as part of its plan to raise funds to reduce its debt load in recent years.
TC Energy is investing about $6 billion per year on capital projects to drive revenue and cash flow expansion. The surge in natural gas demand in both North America and oversees bodes well for the firm. The company’s natural gas transmission networks are in close proximity to many planned data centres that will get their electricity from gas-fired power generation sites.
TC Energy’s Coastal GasLink pipeline connects natural gas producers to the new LNG Canada liquified natural gas export facility on the coast of British Columbia. Global demand for Canadian natural gas is robust and TC Energy is already evaluating plans to double the capacity of the pipeline. Additional LNG export sites are under construction in British Columbia and others could be on the way in Manitoba and in the eastern part of the country as Canada moves to become an energy superpower. TC Energy would be a good candidate to participate in the construction and operation of any new major natural gas pipelines that get the green light.
The stock trades near $85 per share at the time of writing compared to $100 in recent weeks. The drop gives investors a chance to pick up TRP on a decent pullback and secure a solid 4.1% dividend yield. TC energy raised the dividend in each of the past 26 years.
The bottom line
Enbridge and TC Energy pay good dividends that should continue to grow. If you have some cash to put to work, these stocks deserve to be on your radar right now for a TFSA portfolio focused on long-term passive income.
