Given their solid underlying businesses, reliable cash flows, high yields, and healthy growth prospects, these two high-yield Canadian stocks are ideal for your TFSA.

Posted by

Rajiv Nanjapla

Published August 16

ENBSRU.UN Key Points

  • Investing in a TFSA with quality dividend stocks like Enbridge and SmartCentres can provide tax-free returns and long-term wealth growth, focusing on assets with strong cash flows, reliable payouts, and robust growth potential.
  • Enbridge’s extensive energy infrastructure and SmartCentres’ strategic retail and office properties offer high yields with resilience against economic volatility, making them ideal candidates for building wealth in a TFSA.

A Tax-Free Savings Account (TFSA) is an excellent vehicle for long-term wealth creation, allowing investors to earn tax-free returns on eligible investments within their available contribution room. However, investors should be selective when choosing TFSA investments, as selling stocks at a loss can permanently reduce their contribution room. Therefore, focusing on quality dividend stocks with well-established businesses, reliable cash flows, strong payout track records, and solid growth prospects can be an effective strategy for long-term wealth building.

Against this backdrop, here are two high-yield dividend stocks that could be excellent additions to a TFSA. Let’s take a closer look at these investment opportunities.

Enbridge

Enbridge (TSX:ENB) is an attractive dividend stock for a TFSA, supported by its diversified asset base, reliable cash flows, strong dividend track record, and solid growth prospects. The company operates approximately 200 revenue-generating energy infrastructure assets, with around 98% of its earnings coming from regulated assets and long-term take-or-pay contracts. Moreover, about 80% of its earnings are protected by inflation-indexed mechanisms, helping reduce its exposure to economic volatility and commodity price fluctuations.

This resilient business model has enabled Enbridge to pay dividends for more than 70 years and increase its payout for 31 consecutive years. With a quarterly dividend of $0.97 per share, the stock currently offers an attractive yield of 5.43%.

Looking ahead, rising oil and natural gas production across North America should continue to drive demand for Enbridge’s infrastructure. The company is advancing its $41 billion secured capital program, with projects expected to come online through the end of this decade. These investments could support annualized adjusted EPS (earnings per share) and cash flow growth of approximately 5% through 2030, providing a solid foundation for continued dividend growth and making Enbridge an appealing long-term TFSA investment.

SmartCentres Real Estate Investment Trust

Another high-yield dividend stock that would be an excellent addition to a TFSA is SmartCentres Real Estate Investment Trust (TSX:SRU.UN), which owns and operates approximately 201 strategically located, income-producing retail and office properties across Canada. The REIT benefits from a strong tenant base, with 95% of its tenants having a national or regional presence and 80% providing essential services. This solid tenant base supports a healthy occupancy rate and resilient cash flows across economic cycles.

Consistent lease renewals, healthy rental growth, and ongoing lease-up activities have further supported the REIT’s cash flows and dividend payments. Its monthly distribution of $0.15417 per unit currently yields 6.46%.

Looking ahead, demand for retail space should remain healthy, supported by economic growth and limited new supply due to rising construction costs. SmartCentres is expanding its portfolio through several development projects, including a 200,000-square-foot Canadian Tire store in Toronto. The REIT expects to complete the project in the fourth quarter of this year. The REIT has also acquired a 17-acre parcel in Winnipeg for approximately $10.1 million and is developing two additional self-storage facilities in British Columbia, which are expected to come online next year.

Overall, SmartCentres has approximately 0.8 million square feet of properties under construction and another 87 million square feet in various stages of planning and development. Given its resilient cash flows, attractive yield, and substantial development pipeline, SmartCentres could be an excellent long-term TFSA investment.