Canadian pensioners are searching for top TSX dividend stocks to add to their self-directed Tax-Free Savings Account (TFSA) portfolios focused on generating reliable passive income.
The pullback in the share prices of some big dividend payers is giving retirees a chance to buy quality dividend-growth stocks at a discount to the 2026 highs.
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Enbridge
Enbridge (TSX: ENB) is a giant in the North American energy infrastructure industry with a current market capitalization of close to $150 billion. The share price is down more than 15% from where it traded in the summer, pushing the dividend yield to almost 6% in recent weeks.
Enbridge continues to expand its asset portfolio through a combination of acquisitions and project developments.
Deals in recent years have focused on diversifying the business, primarily in the United States. Enbridge spent US$3 billion to buy an oil export terminal in Texas and then purchased three American natural gas utilities for US$14 billion in 2024. In between these deals, Enbridge bought the third largest wind and solar developer in the United States.
The focus has now turned back to oil pipelines, storage, and marketing assets with more than US$3 billion in acquisitions announced over the past few weeks in core oil regions south of the border.
On the development side, Enbridge is working through a $41 billion capital program that is spread out across the business units. Investments in new projects are trending around $10 billion per year. As the new assets are completed and go into service, the boost to cash flow will complement growth coming from the acquisitions. This should enable the board to continue raising the dividend at a steady pace. Enbridge has increased the distribution for 31 consecutive years.
Demand for Canadian and American oil and natural gas are on the rise, both domestically and from international buyers. Countries that have seen their oil and natural gas supplies disrupted by wars in recent years are scrambling to secure reliable energy deliveries from stable producers. The expansion of export capacity for both oil and liquified natural gas (LNG), particularly in the United States, has increased market reach for North American producers. Enbridge’s oil and natural gas transmission networks are important for connecting producers to the export terminals.
At home, Enbridge is a partner on the Woodfibre LNG export site nearing completion on the coast of British Columbia. Canada’s new goal of becoming an energy superpower could pave the way for Enbridge to participate in the construction and operation of additional pipeline capacity.
Risks
The drop in the share price in the past few months is largely due to rising borrowing costs. Treasury yields have moved higher on the anticipation of a series of rate hikes by the central banks in Canada and the United States. The U.S. Federal Reserve has already increased rates with more expected in the coming months due to sticky inflation.
Enbridge uses debt to fund part of its growth program. Higher borrowing costs reduce profits and can cut into cash that is available to pay off debt or boost the dividend. The last time the central banks had to raise rates to tame inflation, in 2022 and 2023, Enbridge’s share price dropped about 25% from peak to trough. It subsequently recovered the losses and surged to a new high this year.
The bottom line
Enbridge pays a good dividend that should continue to grow, supported by the capital program and acquisitions. Near-term volatility is expected, but the stock has already pulled back considerably, and the high yield pays investors well to ride out any further turbulence.
