Canadian savers are wondering if they will ever be able to retire, as rising food, fuel, and housing costs threaten to eat up most of their pension payments.
One strategy investors can use to build extra retirement savings in a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) involves owning top Canadian dividend stocks and allocating the distributions to acquire new shares.
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Fortis
Fortis (TSX: FTS) is a good example of a stock where dividend growth is more important than the initial yield an investor gets when they initially purchase the shares.
At the time of writing, Fortis has a yield of 3.4%. The stock price is down to $75 from the 12-month high around $83 per share, providing investors with a chance to pick up the utility on a pullback.
Fortis has increased its dividend for 52 consecutive years and intends to boost the distribution by 4% to 6% annually through at least 2030. This is good guidance in a market where trade uncertainty and high oil prices threaten to push the economy into a recession.
Fortis is working on a capital program of close to $29 billion that it says will raise the rate base by about 7% per year over five years. As the new assets are completed and go into service, the added revenue and profits should enable Fortis to deliver the planned dividend increases.
Long-term Fortis investors have enjoyed good total returns. A $10,000 investment in Fortis 30 years ago would be worth about $300,000 right now with the dividends reinvested.
Enbridge
Enbridge (TSX: ENB) is another dividend-growth star. The company has increased the distribution annually for the past 31 years.
Enbridge’s secured capital program is currently $41 billion. The projects are spread out across the different business units, including oil and natural gas transmission and storage infrastructure, renewable energy, and oil and liquified natural gas (LNG) exports.
Enbridge continues to make strategic acquisitions to drive additional growth. Most of the deals have occurred in the United States in recent years. Enbridge spent US$3 billion in 2021 to buy an oil export terminal in Texas and US$14 billion in 2024 to purchase three natural gas utilities. In the past few weeks, Enbridge announced a $600 million acquisition of oil gathering and transmission infrastructure in Texas and New Mexico that will connect more producers to its export facility. In the American Rockies region, Enbridge is spending US$2.6 billion to buy oil pipeline, storage, and marketing assets to further expand the American portfolio.
Enbridge is now the largest natural gas utility operator in North America. The new gas utility assets complement the existing natural gas storage and distribution network that already moved about 20% of the natural gas used in the United States. In Canada, Enbridge is a partner on the new Woodfibre LNG export facility that is nearing completion on the coast of British Columbia.
International demand for North American oil and natural gas is on the rise as countries seek to secure reliable supplies from stable producers.
Investors who buy ENB stock at the current price can get a dividend yield of 5.7%.
A $10,000 investment in Enbridge 30 years ago would be worth about $540,000 today with the dividends reinvested.
The bottom line
Fortis and Enbridge pay good dividends that should continue to grow. If you have some cash to put to work in a buy-and-hold retirement portfolio, these stocks deserve to be on your radar.
