Canadian retirees and other investors seeking reliable dividend income are searching for good TSX stocks to add to their self-directed Tax-Free Savings Account portfolios.
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Fortis
Fortis (TSX: FTS) has increased its dividend for 52 consecutive years. This is one of the best dividend-growth stories on the TSX today, and the trend looks set to continue.
The company is working on $28.8 billion in capital projects that will raise the rate base from around $42 billion to nearly $58 billion over five years. As the new assets are completed and go into service, the boost to earnings should support planned dividend growth of 4% to 6% through at least 2030.
Fortis has additional projects under consideration across its asset portfolio that could get added to the development plan. The company would also be a good candidate to participate in Canada’s vision to create a national power grid. Fortis has expertise in building and operating electricity networks in Canada and the United States.
The stock’s dividend yield is only 3.3%, but the yield on the initial investment will steadily rise as the dividend increases in the coming years.
Long-term investors have done well holding FTS shares. A $10,000 investment in the stock 20 years ago would be worth more than $60,000 today with the dividends reinvested.
TC Energy
TC Energy (TSX: TRP) raised its dividend in each of the past 26 years. The company now focuses primarily on natural gas transmission and power generation after spinning off its oil pipeline operations into a separate company.
TC Energy’s capital program is running at about $6 billion per year, and there are several opportunities to extend the growth program over the medium term.
The company plans to double capacity on its Coastal GasLink pipeline, which currently carries natural gas to the LNG Canada export terminal on the coast of British Columbia. Strong global demand for Canadian natural gas is driving new investments in export capabilities. LNG Canada is moving ahead with phase two of its expansion.
The Canadian government and the province of Manitoba are in discussions to potentially enable the construction of a new LNG export terminal near Churchill that would send LNG shipments to Europe via Hudson Bay. TC Energy would potentially build the natural gas pipeline that would connect producers in Western Canada to the new export site.
South of the border, TC Energy’s extensive natural gas transmission networks in the United States and Mexico position the company to benefit from rising natural gas demand driven by the construction of new gas-fired power generation facilities. These sites are being built to meet soaring electricity demand from AI data centres and other large power users.
TC Energy’s share price has pulled back in recent months from its record highs. The dip from $100 to the current price near $87 has pushed the dividend yield up to 4%.
The bottom line
Fortis and TC Energy pay good dividends that should continue to grow. If you have some cash to put to work in a self-directed portfolio focused on dividends, these stocks deserve to be on your radar.
