This is a top banner! Learn more

TFSA Passive Income: 2 Top Stocks for Retirees to Buy in 2022

These two dividend stocks look cheap and offer above-average yields for TFSA investors seeking passive income.

| More on:
A close up image of Canadian $20 Dollar bills

Image source: Getty Images

Canadian pensioners are searching for top TSX dividend stocks with growing distributions to generate reliable passive income inside their TFSA portfolios.

Enbridge

Enbridge (TSX:ENB)(NYSE:ENB) went through an important transition before the pandemic that enabled the company to get through the past two years in good shape. Management monetized about $8 billion in non-core assets and streamlined the corporate structure by bringing four subsidiaries under the roof of the parent.

These efforts shored up the balance sheet and made it easier for investors to evaluate the business. Enbridge saw its oil pipeline operations take a hit in 2022, as throughput dropped due to the plunge in fuel demand. The situation corrected itself last year, and Enbridge is poised to deliver solid results in 2022 and beyond.

The board raised the dividend by 3% for 2022 and intends to buy back about 1.5% of the outstanding stock. Enbridge expects distributable cash flow to increase by 5-7% over the medium term, so the upcoming annual dividend increases could be in that range.

The company is driving growth through investments in its natural gas and renewable energy businesses. Enbridge also has the financial clout to make strategic acquisitions. The recent US$3 billion purchase of an oil export facility in the United States is a good example. Consolidation in the energy infrastructure sector is expected to continue in the next few years, and Enbridge will likely participate when appealing deals arise.

Critics of the energy infrastructure sector say that pipeline growth is a dead business. That’s likely the case for major oil pipeline projects, but oil demand and production are not going to slow down for years, and the product still has to get from producers to customers. This should make Enbridge’s existing network more valuable when no new projects are getting built.

The stock appears cheap at the current share price near $51.50 and provides a 6.7% dividend yield.

TransAlta Renewables

TransAlta Renewables (TSX:RNW) took a beating over the past year, as investors dumped renewable energy stocks and the company hit some unexpected operational snags. TransAlta Renewables experienced an unplanned shutdown at a gas-fired power plant and then found out that it needs to halt its entire Kent Hills wind facility while it replaces faulty foundations on 50 turbines.

As a result, the stock price is down 23% in the past 12 months. The bad news appears to be priced into the shares at this point, and investors have a chance to buy TransAlta stock at a discount and collect an attractive 5.5% dividend yield.

The repairs on the Kent Hills sites should be done by the end of 2023. TransAlta Renewables put new assets into service in late 2021, and additional revenue is expected this year from a recent acquisition and the completion of other projects. This will help offset the lost revenue from Kent Hills.

It wouldn’t be a surprise to see the share price move 20% higher by the end of the year.

The bottom line on top passive-income stocks to buy now

Enbridge and TransAlta Renewables appear attractive right now for TFSA investors seeking high-yield dividend stocks for passive income. If you have some TFSA cash to put to work in a portfolio focused on dividends, these stocks deserve to be on your radar.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool recommends Enbridge. Fool contributor Andrew Walker owns shares of Enbridge and TransAlta Renewables.

More on Dividend Stocks

Dividend Stocks

Just Released: The 5 Best Stocks to Buy in May [PREMIUM PICKS]

Premium content from Motley Fool Stock Advisor Canada “Best Buys Now” Pick #1: Pason Systems (TSX:PSI) For those thinking they’ve “missed”…

Read more »

Payday ringed on a calendar
Dividend Stocks

How Canadians Can Make $300 a Month in Passive Income

Looking to create a passive-income stream? I’d put these three Canadian dividend stocks on your watch list.

Read more »

Illustration of bull and bear
Dividend Stocks

2 Top Dividend Stocks to Buy While the Market Is Tanking

Passive-income investors should have these two top dividend stocks on their radars right now.

Read more »

Glass piggy bank
Dividend Stocks

Which Is More Relevant With Rising Inflation: The RRSP or TFSA?

Canadians can ensure growing retirement savings amid rising inflation by contributing more to their RRSPs.

Read more »

edit Person using calculator next to charts and graphs
Dividend Stocks

2 Top Dividend Stocks to Buy While the Market Is in Turmoil

Canadian investors looking to stop the bleeding in their investment portfolios should have these two dividend stocks on their radar.

Read more »

calculate and analyze stock
Dividend Stocks

TFSA Investors: 2 Cheap TSX Dividend Stocks to Buy Now for Passive Income

These two dividend stocks look cheap right now for TFSA investors seeking high yields and passive income.

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

3 Top TSX Stocks for Investors Seeking Passive Income

Here's why investors looking for passive income should consider these three top TSX stock in this rising-rate environment.

Read more »

money cash dividends
Dividend Stocks

TFSA Pension: How to Earn an Extra $4,278.75 Per Year in Tax-Free Passive Income

These two top dividend stocks pay attractive yields for a TFSA focused on passive income.

Read more »