Canadian pensioners are searching for good TSX dividend stocks to hold inside a self-directed Tax-Free Savings Account (TFSA) focused on generating reliable passive income.
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Fortis
Fortis (TSX: FTS) might not have the highest yield available in the market, but its track record of dividend growth and the reliability of its income stream easily make up for a slightly lower initial return.
Fortis operates nearly $80 billion in utility assets in Canada, the United States, and the Cayman Islands. A full 95% of the assets are involved in the transmission and distribution of essential electricity and natural gas to households and businesses.
Fortis grows through a combination of strategic acquisitions and development projects. The company hasn’t completed a major purchase for some time, but is working on a $28.8 billion capital program that is expected to raise the rate base by about 7% annually over five years. As the new assets start to generate revenue and contribute to profits, the company expects the boost to cash flow to support ongoing yearly dividend growth of 4% to 6% through at least 2030.
Fortis has other projects under consideration that could extend the capital program outlook. Demand for electricity and natural gas are expected to rise in Canada and the United States in the coming years as new gas-fired power generation facilities are built to supply electricity to new AI data centres.
Fortis raised the dividend in each of the past 52 years. The current dividend yield is 3.4%.
Enbridge
Enbridge (TSX: ENB) is widely known for its oil and natural gas transmission and storage operations in Canada and the United States. These core assets move about 30% of the oil produced in the two countries and roughly 20% of the natural gas used in the United States. In addition, Enbridge is the largest operator of natural gas utilities in North America and has moved into the export segment, as well, through its purchase of an oil export terminal in Texas and its stake in the Woodfibre LNG export terminal nearing completion on the coast of British Columbia.
In essence, Enbridge’s assets are strategically important for the smooth operation of the Canadian and American economies.
The company has been busy in recent years with both acquisitions and organic projects driving growth. Enbridge recently announced more than US$3 billion in deals to acquire oil pipeline, storage, and marketing assets in the United States. Enbridge is also working on a $41 billion secured capital program that will see the company invest roughly $10 billion annually on new projects across the asset portfolio. Adjusted income and distributable cash flow are projected to rise by about 5% per year over the medium term. This should enable the board to continue increasing the dividend. Enbridge raised the distribution in each of the past 31 years.
Investors can take advantage of the recent pullback in the stock price o pick up a 5.9% dividend yield.
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 TFSA focused on dividend income, these stocks deserve to be on your radar.
