Canadian investors are searching for good TSX dividend stocks to add to a self-directed Tax-Free Savings Account (TFSA) focused on generating reliable and growing dividend income.
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Enbridge
In recent months, Enbridge (TSX: ENB) has given back some of the big gains it chalked up over the previous two years. The dip is providing new investors with a nice entry point, with the dividend yield now at 5.8%.
That’s a solid return in the current environment with inflation in Canada running just above 3%.
Dividends
Enbridge’s development backlog and contributions from recent acquisitions should enable the firm to extend its streak of 31 annual dividend increases. The company is working on a $41 billion secured capital program that is expected to roll out roughly $10 billion per year in growth projects over the medium term. As the new assets get completed and start to generate revenue and profits, Enbridge says it should be able to deliver 5% annual growth in distributable cash flow.
Contributions from takeovers could push that amount higher. Enbridge recently announced it is spending more than US$3 billion to buy additional oil pipelines, storage, and marketing operations in the United States. The assets will complement transmission networks and export facilities Enbridge already owns in the United States. Management’s return to the acquisition of oil pipeline assets comes after several years of portfolio diversification that saw the company buy an oil export terminal in Texas, three American natural gas utilities, and the third-largest solar and wind developer in the United States.
Canada’s plan to become an energy superpower could lead to new opportunities for either oil or natural gas transmission infrastructure in the country. Enbridge is already a partner on the Woodfibre liquified natural gas (LNG) export facility being built on the coast of British Columbia.
South of the border, Enbridge could remain active on the acquisition front as the industry continues to consolidate. Demand is on the rise for oil and natural gas as international buyers scramble to secure reliable supplies from stable producers. In the domestic markets, there is a need for more natural gas as gas-fired power generation facilities are built to supply electricity to new AI data centres.
Risks for the stock
Enbridge uses debt to fund part of its growth initiatives. Higher borrowing expenses will cut into profits and can reduce cash that is available for dividend increases.
Sticky inflation pushed the U.S. Federal Reserve to raise interest rates at its last meeting. Economists widely expect more increases to occur in the coming months and through 2027. Much of this is probably already priced into Enbridge’s shares at this point. Anticipation of higher rates is the main reason the stock is down roughly 17% from the 2026 peak. In the event, however, that inflation continues to rise, the central banks could be forced to raise interest rates more aggressively. In that scenario, Enbridge’s share price would likely face additional headwinds.
The bottom line
Enbridge pays an attractive dividend that should continue to grow. If you have some cash to put to work in a portfolio focused on dividend income, this stock deserves to be on your radar.
