Retirees want to get the most passive income possible from their savings. The Tax-Free Savings Account (TFSA) is a good option for holding income-generating investments, including top Canadian dividend stocks and Guaranteed Investment Certificates (GICs).
Market corrections can be scary, but they also give investors a chance to buy great TSX dividend stocks at discounted prices. A drop in the share price increases the yield on the dividend and sets new investors up to benefit when the market recovers.
GICs offer rates around 5% today, so they should be part of the mix. Quality dividend-growth stocks still look attractive if you don’t need to access the principal investment in the near term.
Enbridge
Enbridge (TSX:ENB) increased the dividend in each of the past 28 years. Investors should see dividend growth continue in the 3% range, supported by anticipated gains in adjusted earnings and growing distributable cash flow.
Enbridge has a $17 billion capital program on the go that will drive revenue and cash flow expansion. In addition, the company has the financial clout to make strategic tuck-in acquisitions to give revenue an added boost. We saw this with the US$3 billion purchase of an oil export terminal in Texas in 2021.
Enbridge plays an integral role in the smooth operation of the Canadian and U.S. economies. The oil pipelines move 30% of the oil produced in the two countries. Enbridge’s natural gas distribution utilities provide fuel to millions of Canadian businesses and households. In addition, Enbridge has a growing renewable energy portfolio.
Enbridge stock trades near $48 per share at the time of writing compared to more than $59 at the peak last year.
The pullback appears overdone, and investors can now get a 7.4% dividend yield from ENB stock.
BCE
BCE (TSX:BCE) has been a top pick among retirees for decades, and there is no reason for that to change. The communications giant remains very profitable and has the balance sheet strength to make the investments needed to protect its wide competitive moat.
BCE spent roughly $5 billion in 2022 on projects that include the 5G mobile network and the expansion of the fibre-to-the-premises program.
Profits are expected to dip in 2023 compared to last year due to soaring interest rates that are driving up borrowing costs. In addition, the media business is going through some tough times, as advertisers reduce spending across the television and radio assets.
That being said, BCE still projects revenue growth and free cash flow growth for 2023 compared to last year. This should support a dividend increase for 2024. BCE raised the distribution by at least 5% annually over the past 15 years.
At the time of writing, BCE stock provides a dividend yield of 6.4%.
The bottom line on top stocks for passive income
Enbridge and BCE pay attractive dividends that should continue to grow. If you have some cash to put to work in a TFSA focused on passive income, these stocks deserve to be on your radar.
