With the TSX near all-time highs and economic uncertainty ahead, it makes sense to look for stocks with a long track record of dividend growth throughout the economic cycle.
Enbridge
Enbridge (TSX:ENB) has been on an upward trend over the past two years, from $46 to its current price above $70 per share. However, investors who missed the rally can still get a 5.5% return on the stock.
Enbridge is a giant in the North American energy infrastructure and utilities sectors. The company transports about 30% of the oil produced in the U.S. and Canada and about 20% of the natural gas used by U.S. homes and businesses.
Enbridge’s $14 billion purchase of three U.S. natural gas utilities in 2024 made Enbridge the largest operator of natural gas utilities in North America. These companies, combined with existing natural gas transmission and storage assets, position Enbridge to benefit from expected growth in natural gas demand as new gas-fired power generation facilities are built to supply electricity to AI data centers.
Enbridge has also moved into energy exports in recent years and has also expanded its renewable energy group. The diversification of the asset portfolio broadens the income stream and provides more opportunities for expansion.
Enbridge is currently working on a $35 billion capital program that will increase distributable cash flow over the coming years. This should support steady dividend growth. Enbridge has increased its dividend in each of the past 31 years.
Canada is considering expanding the oil pipeline’s capacity to carry oil from Alberta to the coast and ship it to international buyers. If a major project goes ahead, Enbridge would be one of the leading candidates to participate.
Fortis
Fortis (TSX:FTS) has given investors a dividend increase for 52 years in a row. That’s the kind of reliability you want to see when choosing dividend stocks to generate passive income.
Fortis owns electricity generation, electricity transmission and natural gas companies that generate almost all of their revenue from rate-regulated assets. This provides predictable cash flow that helps management plan growth investments. Fortis is working on a $28.8 billion capital program through 2030. With the new assets completed and in service, the boost to cash flow should allow the board to achieve its goal of increasing the dividend by 4% to 6% per year over that period. Other projects are being considered to add to the development programme.
As a leader in Canada’s energy sector, Fortis could also potentially play a key role in the government’s plans to build a national electricity grid.
Investors who buy Fortis at the current price can get a dividend yield of 3.5%.
The bottom line
Enbridge and Fortis pay attractive dividends that are expected to continue growing. If you have some money to put to work in a TFSA that focuses on generating passive income, these stocks deserve to be on your radar.
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