Canadian retirees are looking for ways to get a better return on their savings. A popular strategy is to own high-yield TSX dividend stocks in a Self-Directed Tax-Free Savings Account (TFSA).
In the current climate, with markets at record highs, it makes sense to look for stocks that have a long history of steady dividend growth during economic recessions, as well as during periods of economic expansion.
Enbridge
Enbridge (TSX:ENB) is trading near $67 per share at the time of writing. The stock recently topped $70 and is up about 19% over the past year. Despite the rally, investors can still earn a dividend yield of 5.6% at current prices.
Enbridge is a giant in the North American energy infrastructure industry. The company transports approximately 30% of the oil produced in Canada and the United States and 20% of the natural gas used by U.S. businesses and households.
Management has shifted growth capital in recent years to take advantage of emerging opportunities. Enbridge purchased an oil export terminal in Texas and is a partner in the Woodfibre liquefied natural gas (LNG) export facility being built on the coast of British Columbia. In addition, Enbridge has expanded its wind and solar energy development activities and recently acquired three natural gas companies in the United States. The diversification of assets from existing oil and natural gas transmission businesses provides a more balanced revenue stream and provides opportunities for new growth projects.
Enbridge is currently pursuing a $32 billion capital program that should help drive steady growth in distributable cash flow over the medium term, supporting continued dividend increases. Enbridge has consistently increased its shareholder payout over the past thirty years.
As Canada looks to expand its energy exports to global buyers, Enbridge could potentially be a partner for new major oil pipelines approved to move oil from Alberta producers to the coast. At the same time, Enbridge is well-positioned to further expand its presence in the U.S. energy sector.
Canadian natural resources
Weak oil prices over the past year have pushed down the stock prices of oil producers. Canadian natural resources (TSX:CNQ), for example, is trading near $45 per share at the time of writing, up from over $55 last year.
Investors can take advantage of the pullback to pick up CNQ’s 5.2% dividend yield now.
CNRL is a major player in the Canadian oil and gas sector with extensive production and reserves. The company operates oil sands, heavy and light conventional oil and offshore oil locations. CNRL is also a major producer of natural gas.
The expansion of LNG export capacity in Canada will enable CNRL to sell more natural gas to international buyers in the coming years. Gas prices are currently low in Canada due to an abundance of supply, but the market will eventually stabilize, and global prices for LNG are generally higher than the price producers get by selling gas to the United States.
New oil pipeline capacity would also benefit CNRL, whether it be a new pipeline to the Canadian coast or additional capacity to the United States via a revived Keystone XL project, which has recently come up between Canada and the US as part of ongoing trade negotiations.
CNRL has a strong balance sheet to weather low energy prices and the financial strength to make major acquisitions to drive growth. This is largely why the board has been able to increase the dividend annually for the past 25 years.
The bottom line
Market volatility can be expected in the short term. However, Enbridge and CNRL pay attractive dividends that are expected to continue growing. If you have some money to put to work in a TFSA that focuses on passive income, these stocks deserve to be on your radar.
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