Canadian retirees are searching for top TSX dividend stocks to add to their self-directed Tax-Free Savings Account (TFSA) portfolios focused on generating steady passive income to complement the Canada Pension Plan (CPP), Old Age Security (OAS), and company pensions.
In the current market conditions where inflation and trade uncertainty pose economic risks over the near term, it makes sense to search for stocks that can deliver dividend growth through the full economic cycle.
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Fortis
Fortis (TSX: FTS) raised its dividend in each of the past 52 years. More gains should be on the way, as the board intends to boost the distribution by 4% to 6% annually through at least 2030.
Fortis is working on a $28.8 billion capital program that is expected to raise the rate base from $42 billion to about $58 billion over five years. The projects are spread out across the various business lines. Fortis owns and operates $79 billion in assets that include power-generation facilities, electric and natural gas distribution utilities, and electricity transmission networks. Almost all of the revenue comes from rate-regulated assets delivering essential products and services.
Fortis trades near $74 at the time of writing, compared to the 12-month high around $83. The current dividend yield is close to 3.5%.
Enbridge
Enbridge (TSX: ENB) has increased its dividend for 31 consecutive years. As with Fortis, the company has a large capital program on the go that should drive cash flow higher over the medium term to support steady dividend growth.
Enbridge is spending $41 billion on development projects that range from oil and natural gas pipeline expansions to renewable energy installations and liquefied natural gas (LNG) export facilities. The company has also been aggressive in the acquisitions market. Enbridge recently announced deals to buy oil infrastructure assets in the U.S. Rockies and the Permian Basin. These deals, valued at US$2.55 billion and US$600 million respectively, follow the US$14 billion purchase of three American natural gas utilities in 2024 and the US$3 billion purchase of an oil export terminal in Texas in 2021.
International demand for North American energy is on the rise as countries scramble to secure reliable supplies from stable producers. At home, the surge in construction of gas-fired power generation facilities bodes well for Enbridge’s natural gas transmission and distribution businesses.
ENB stock trades close to $67 per share at the time of writing. This is down from $80 in recent months. Investors who buy the dip can pick up a dividend yield of 5.8%.
The bottom line
Rising bond yields and higher interest rates could put additional near-term pressure on the share prices of these two companies, so investors should be prepared for some volatility.
That being said, Fortis and Enbridge pay good dividends that should continue to grow, supported by large capital programs and potential additional projects as demand rises for natural gas and electricity in the North American market. Further weakness in the stocks would be viewed as an opportunity to add to the position.
If you have some cash to put to work in a buy-and-hold TFSA portfolio focused on delivering tax-free passive income, these stocks deserve to be on your radar.
