The recent pullback in certain sectors of the TSX is giving investors who missed the big rally over the past two years a new chance to buy top Canadian dividend stocks at cheaper prices for their self-directed Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP) portfolios focused on income and long-term capital appreciation.
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Enbridge
Who doesn’t like a 5.9% dividend yield? That’s what investors can now get from Enbridge (TSX: ENB) after the decline that occurred in the share price over the past two months from around $80 to the current price near $66 per share.
At this yield, the stock doesn’t have to appreciate very much over the long run to generate a decent return on the investment. It also gives investors a bit of a cushion to ride out additional potential downside, which is quite possible in the coming weeks or months, if interest rates rise more than currently anticipated. Pipeline companies and utilities tend to face headwinds when interest rates increase, as these businesses use significant amounts of debt to fund capital projects that can cost billions of dollars and often take years to complete. Enbridge is best known for its oil infrastructure assets, but it is also the largest operator of natural gas distribution utilities in North America.
Despite the rate risks, investors should still see steady dividend growth. Enbridge is working on a $41 billion capital program that the company says will boost adjusted earnings and distributable cash flow by 5% annually over the medium term. This is in addition to the contributions from more than US$3 billion in recent acquisitions in the United States. Enbridge raised the dividend in each of the past 31 years.
TC Energy
TC Energy (TSX: TRP) is another major Canadian energy infrastructure player with assets in Canada and the United States, as well as in Mexico.
The company completed two major pipeline projects in recent years that are now generating revenue. The 670km Coastal GasLink pipeline took much longer than anticipated to complete and saw its budget more than double to roughly $14.5 billion, but the timing of the project has proven to be fortuitous, despite the massive cost overrun. Coastal GasLink connects Canadian natural gas producers to the new LNG Canada export facility on the coast of British Columbia. International demand for Canadian LNG is very strong, driven by the disruptions to supplies caused by wars in Ukraine and the Middle East. Countries around the globe are scrambling to secure reliable long-term deliveries from stable producers. TC Energy is planning to double the transmission capacity on Coastal GasLink as LNG Canada moves ahead with an expansion.
In Mexico, TC Energy completed its 715km Southeast Gateway natural gas pipeline last year. That one came in on time and under budget and will move natural gas from production sites to new gas-fired power generation facilities.
TC Energy’s ongoing capital program across the natural gas transmission and power generation businesses is running at a pace of about $6 billion per year. Large new projects could also be added to the growth plan as Canada looks to export LNG from new locations, including through Hudson Bay from Churchill, Manitoba.
TC Energy trades near $82 per share at the time of writing compared to the 2026 high around $100. At the current price the dividend provides a yield of 4.3%. TC Energy has given investors a dividend increase for 26 consecutive years.
The bottom line
Enbridge and TC Energy could dip even further in the coming months if the central banks raise interest rates more aggressively than expected. At their current levels, however, the stocks already look attractive for income investors. If you have some cash to put to work, ENB and TRP deserve to be on your radar.
