Canadian investors finally have an opportunity to buy some of Canada’s top dividend stocks at cheaper prices for their self-directed Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP) portfolios.
Source: Getty Images
Enbridge
Enbridge (TSX: ENB) has pulled back from the 2026 high of $80 reached this summer to the current price near $69. The drop means new investors can now get a solid 5.6% dividend yield from the energy infrastructure giant.
Rising yields on U.S. and Canadian bonds are putting pressure on the stock, as markets increasingly expect sticky inflation to force central banks to raise interest rates later this year or in 2027. Enbridge uses debt to fund part of its growth program, so higher borrowing costs can drive up debt expenses and cut into cash that is available to pay down debt or distribute as dividends.
That being said, Enbridge has a substantial secured capital program underway that will see the company invest more than $40 billion over the medium term. Projects are spread out across its core divisions, including pipelines, export facilities, renewable energy, and natural gas utilities. As the new assets are completed and go into service, management expects the boost in revenue to help drive distributable cash flow higher by about 5% per year. This should support steady dividend growth, even if rate hikes materialize in the next year.
Enbridge raised the dividend in each of the past 31 years, including during 2022 and 2023 when the central banks aggressively raised interest rates to battle high post-pandemic inflation that was more severe than it is now.
Investors can get good exposure to growth in the American energy sector through this top Canadian dividend stock, as Enbridge has extensive assets and operations in the United States.
Fortis
Fortis (TSX: FTS) is another top Canadian dividend stock that has recently given back some of the gains it racked up over the past two years. The Canadian utility firm currently trades near $76 per share compared to $83 in July.
The current $28.8 billion capital program is expected to increase the rate base from $42 billion to nearly $58 billion over five years. As with Enbridge, a jump in interest rates and higher borrowing costs in the bond market would be a headwind for the stock, as it was in 2022 and 2023. Fortis also uses debt to fund its capital projects that can cost billions of dollars and sometimes take years to complete.
Despite these risks, management expects earnings to rise enough to support annual dividend increases of 4% to 6% through at least 2030. Fortis raised the dividend in each of the past 52 years, so investors should be comfortable with the guidance.
Canada intends to build a national power grid as part of its broader plan to become an energy superpower. Fortis has expertise in constructing and operating power grids, so there could be new growth opportunities on the horizon, in addition to other projects already under consideration.
Fortis operates power generation facilities, natural gas distribution utilities, and electricity transmission networks in Canada, the United States, and the Caribbean.
The bottom line
Additional weakness is certainly possible over the near term, but Enbridge and Fortis already look attractive at the current level and 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.
