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Canadian investors seeking passive income in a Tax-Free Savings Account (TFSA) and those more focused on total returns inside a Registered Retirement Savings Plan (RRSP) can benefit from investing in high-yield Canadian dividend stocks with a history of consistent distribution growth. Two notable examples are Enbridge and TC Energy.
Enbridge (TSX:ENB)
Enbridge is a major player in the North American energy infrastructure sector, transporting 30% of the oil produced in Canada and the United States and 20% of the natural gas used by American homes and businesses. The company's current market capitalization is approximately $105 billion.
Current Performance:
- Stock Price: Around $49.50, down from $59 two years ago.
- Dividend Yield: 7.4%.
Key Factors:
1. Interest Rates: The recent drop in Enbridge's stock price is largely due to rising interest rates in Canada and the United States. However, with central banks appearing to have inflation under control, rate cuts are expected, potentially lowering borrowing costs for Enbridge and freeing up cash for further investments or distributions.
2. Growth Potential: Enbridge is finalizing a US$14 billion purchase of three natural gas utilities in the U.S. and is working on a $25 billion secured capital program. This should result in a distributable cash flow (DCF) growth of 3% per year through 2026, increasing to 5% annually afterward, supporting continued dividend growth.
3. Dividend History: Enbridge has raised its dividend for the past 29 years consecutively.
TC Energy (TSX:TRP)
TC Energy operates an extensive network of over 90,000 km of natural gas pipelines and 650 billion cubic feet of natural gas storage capacity across Canada, the U.S., and the Caribbean. The company also has oil pipelines and power-generation facilities.
Current Performance:
- Stock Price: Approximately $52, down from $74 at its peak in 2022.
- Dividend Yield: 7.4%.
Key Factors:
1. Asset Sales and Spin-offs: TC Energy plans to sell $3 billion in assets in 2024 and spin off its oil pipelines business to unlock value and raise additional cash. These moves, following a $5.3 billion sale of a part interest in U.S. assets last year, aim to strengthen the balance sheet.
2. Capital Program: The company is set to achieve asset growth of about $8 billion in 2024, with a capital program run rate expected to be between $6 billion and $7 billion annually from 2025 onwards.
3. Dividend History: TC Energy has increased its dividend for the past 24 years, with annual hikes of 3-5% anticipated as new assets become operational.
Enbridge and TC Energy are compelling high-yield dividend stocks that offer substantial income potential and the likelihood of continued distribution growth. Although market volatility may persist in the short term, these stocks are attractively priced and merit consideration for inclusion in a dividend-focused portfolio.
