Retirees and other self-directed Tax-Free Savings Account (TFSA) investors are searching for great Canadian dividend stocks with high yields and reliable distributions to add to their portfolios targeting passive income.
Dividend stocks that took a beating through most of 2023 are starting to recover, but many still look undervalued and offer big dividends that should be safe.
Enbridge
Enbridge (TSX:ENB) is a major player in the North American energy infrastructure sector. The company moves 30% of the oil produced in Canada and the United States and 20% of the natural gas consumed by American businesses and homes.
ENB stock is down from $59 in June 2022 to the current price near $47. It was as low as $43 in October.
In recent years, Enbridge has shifted new investments to different segments that offer growth opportunities.
The company purchased an oil export facility in Texas for US$3 billion in 2021, and in 2022, Enbridge secured a stake in the Woodfibre liquified natural gas (LNG) project being built in British Columbia. Renewable energy is also becoming more important after the purchase last year of a solar and wind project firm in the United States. Utilities are also becoming a larger part of the mix. The latest deal is a US$14 billion agreement to buy three natural gas utilities in the United States.
The addition of the new assets, along with the ongoing $25 billion capital program, should drive revenue and cash flow growth to support the dividend. Enbridge just raised the distribution by 3.1% for 2024. This is the 29th consecutive annual dividend increase.
Investors who buy ENB stock at the current price can get a 7.8% dividend yield.
TC Energy
TC Energy (TSX:TRP) is another pipeline giant that looks undervalued. The stock trades near $51.50 at the time of writing compared to more than $70 at the high point last year. Bargain hunters started to buy TRP shares in recent weeks after the stock retested the $45 mark. More upside could be on the way in 2024.
TC Energy recently reached mechanical completion on its $14.5 billion Coastal GasLink pipeline that will carry natural gas from Canadian producers to the new LNG Canada export facility that is expected to be in service in 2025. Coastal GasLink had an initial budget of around $6.6 billion, so the company was forced to monetize some non-core assets to raise funds this year. The process will continue in 2024 with the anticipated spin-off of the oil pipelines division.
Despite the challenges, TC Energy’s overall asset portfolio is performing well, with earnings before interest, taxes, depreciation, and amortization (EBITDA) expected to be 8% higher in 2023 than last year.
Management expects the capital program to support annual dividend increases of at least 3% over the next few years. TC Energy has hiked the payout every year for more than two decades. Investors who buy TRP stock at the current level can get a 7.2% dividend yield.
The bottom line on top TSX dividend stocks
Enbridge and TC Energy are good examples of high-yield TSX dividend stocks paying distributions that should continue to grow. If you have some cash to put to work in a portfolio focused on passive income, these stocks deserve to be on your radar.
