Canadian retirees are looking for ways to generate income from their savings to supplement the Canada Pension Plan (CPP), Old Age Security (OAS) and workplace pensions.
A popular strategy to earn stable passive income is to own high-yield dividend stocks in a Self-Directed Tax-Free Savings Account (TFSA) portfolio. In current market conditions with the TSX trading near all-time highs and rates threatening to trigger an economic downturn, it makes sense to look for market leaders with a long track record of delivering reliable dividend growth.
Enbridge
Enbridge (TSX:ENB) is trading near $65.50 per share at the time of writing. That’s about $5 lower than the 2025 high, giving investors a chance to buy ENB on a dip after the big rally of the past two years.
Enbridge is best known for its extensive oil and natural gas transmission networks that carry approximately 30% of the oil produced in Canada and the United States, and 20% of the natural gas used by American homes and businesses. However, in recent years, management has shifted growth spending to other opportunities. The company 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. Global demand for Canadian and U.S. oil and natural gas is expected to rise in the coming years as countries look for reliable energy supplies from stable countries to fuel electricity production.
Enbridge has also expanded its footprint for natural gas utilities. The company has spent $14 billion to buy three natural gas companies in the United States by 2024. The deal made Enbridge the largest operator of natural gas utilities in North America, just as domestic demand for natural gas is expected to rise. Gas-fired power generation facilities are being built to power new AI data centers.
Enbridge has also expanded its solar and wind divisions. Renewable energy remains an important part of expanding the overall electricity supply needed to meet rising energy demand.
On the development side, Enbridge is working on a $32 billion capital program. As the new assets are completed and come into service, the added revenues are expected to boost cash flow by approximately 5% per annum in the medium term beyond 2026. This should support continued dividend growth. Enbridge has increased its dividend annually for the past 30 years. Investors who buy the stock at current levels could get a dividend yield of 5.75%.
Enbridge has turned away from major pipeline projects in Canada due to regulatory hurdles. These challenges remain, but Canada’s new goal of reducing dependence on the United States for energy sales could create a more favorable environment for new pipelines to be built. Canadian oil and natural gas producers need infrastructure that can connect them to coastal export facilities. If the government decides to allow construction of the pipelines, Enbridge would be a strong candidate to participate in the process.
Risks
Enbridge’s stock price fell from $59 in mid-2022 to $44 in the fall of 2023, in line with rising interest rates in Canada and the United States as central banks fought to control inflation. Rate cuts in 2024 and 2025 have helped revive the stock prices of pipeline and utility companies that use debt to finance their large capital programs. Looking ahead, rates could push inflation higher in 2026. This will make it more difficult for central banks to continue cutting interest rates. In fact, new rate hikes are possible if inflation rises. In that scenario, Enbridge’s stock price would likely come under pressure.
The bottom line
Short-term volatility is expected, but Enbridge pays an attractive dividend that should continue to grow. If you have some money to put to work in a TFSA that focuses on passive income, this stock deserves to be on your radar.
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