Canadian investors who want to add dividend stocks to their self-directed Tax-Free Savings Account (TFSA) portfolio are getting a chance to pick up good yields on some big TSX names.
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Enbridge
Enbridge (TSX: ENB) is a giant in the energy infrastructure and utilities industry. The company’s oil pipelines move about 30% of the oil produced in Canada and the United States. On the natural gas side, Enbridge is the largest operator of natural gas utilities in North America, and its gas transmission system carries roughly 20% of the natural gas used in the United States.
Enbridge chalked up some nice gains for investors in the past two years, but the stock has recently pulled back from $80 to the current price around $69 per share. The dip gives investors who missed the rally a chance pick up a dividend yield of 5.6%.
Enbridge raised the dividend in each of the past 31 years. Additional hikes should be on the way, supported by the $41 billion capital program that is expected to drive distributable cash flow up by about 5% per year over the medium term.
On the acquisition side, Enbridge recently announced a US$600 million deal to buy oil infrastructure assets in the United States as it expands its presence in the Gulf Coast region. Enbridge previously purchased an oil export terminal in Texas for US$3 billion.
Enbridge is positioned well to benefit from rising international demand for Canadian and American energy products, as countries around the globe look to secure reliable supplies of oil and natural gas after the disruptions that have occurred as a result of wars in Ukraine and the Middle East.
Closer to home, natural gas demand in the domestic market is also expected to increase steadily as new gas-fired power generation facilities are completed to supply electricity to AI data centres.
BCE
BCE (TSX: BCE) trades near $32.50 at the time of writing. The stock has actually been on upward trend in recent weeks, but is still down about 9% in the past six months, and sits well off the $74 it reached in 2022 before going into an extended slide.
BCE cut its dividend last year by about 56%. The move was painful for long-term owners of BCE’s shares, but it also helped put a floor under the stock price. Management is now focused on a turnaround plan that includes expanding BCE’s presence in the United States where it sees opportunity to build on its $5 billion acquisition last year of an American fibre internet services provider.
BCE is also investing in sovereign data centre infrastructure in Canada to meet demand from government and corporate clients who are concerned about data security.
High debt levels, falling advertising revenue in the radio and TV operations, and periodic price wars in the mobile market remain headwinds for the legacy business. That being said, most of the pain is likely already reflected in the share price and the reduced dividend payout should be safe. Investors who buy BCE stock at the current level can get a dividend yield of 5.4%.
The bottom line
Enbridge and BCE could see additional downside, but the current dividend yields pay you well to ride out any new turbulence. If you have some cash to put to work in a portfolio focused on dividend income, these stocks deserve to be on your radar.
