Canadian savers are using their self-directed Tax-Free Savings Account (TFSA) contributions to buy top TSX dividend stocks to generate steady and growing streams of tax-free passive income.
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Canadian Natural Resources
Canadian Natural Resources (TSX: CNQ) is riding high on a surge in oil prices and strong production.
The oil and natural gas giant produced 1.7 million barrels of oil equivalent per day (boe/d) in the third quarter. Adjusted net earnings in the quarter came in at $3.4 billion, or $1.67 per share compared to $1.8 billion in the same period last year.
CNRL recently reached its target of $13 billion in net debt. The drop to this level means the company will start chchannelling00% of free cash flow to share buybacks. CNRL has also maintained steady dividend growth as part of its plan to return cash to shareholders. In fact, the board raised the distribution in each of the past 26 years. This is an impressive track record considering the company relies on commodity prices to determine its margins. CNRL’s diversified product portfolio, along with its ability to quickly shift capital across the asset base and a strong balance sheet, enables the board to maintain dividend growth through industry downturns.
CNRL has the financial clout to make large strategic acquisitions when times get tough in the sector. This adds important new production and reserves at low cost and can have a big impact on profit growth when energy prices rebound, as they have this year.
The stock is down about 5% over the past month after chalking up some big gains. Investors who buy the dip can get a dividend yield of 3.6% today.
Enbridge
Enbridge (TSX: ENB) has increased its dividend for 31 consecutive years. More hikes should be on the way, supported by the $38 billion capital program and contributions from acquisitions.
Enbridge moves roughly 30% of the oil produced in Canada and the United States, while its natural gas transmission network carries about 20% of the natural gas used by American businesses and homes. In addition, Enbridge owns natural gas distribution utilities in both countries, along with an oil export terminal in Texas. At home, Enbridge is a partner on the Woodfibre Liquified Natural Gas (LNG) export site being built on the coast of British Columbia. To round things out, Enbridge operates a wind and solar project division.
Demand for North American energy is on the rise as countries seek out reliable long-term supplies from stable producers after severe disruptions caused by sanctions on Russia and war in the Middle East. Enbridge’s extensive energy infrastructure assets in Canada and the United States are strategically important for both countries and position Enbridge to benefit as production and exports increase.
Enbridge trades near $68 per share at the time of writing, compared to $80 a few months ago. The pullback gives investors a chance to buy a meaningful dip and pick up a starting dividend yield of 5.7%.
The bottom line
CNRL and Enbridge pay good dividends that should continue to grow. If you have some cash to put to work in a portfolio focused on dividends, these stocks deserve to be on your radar.
