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2 Top Dividend Stocks to Buy and Hold Right Now

Adam Othman
Various Canadian dollars in gray pants pocket
Various Canadian dollars in gray pants pocket

A Tax-Free Savings Account (TFSA) can be used by investors to meet a wide range of savings goals. One of the most popular strategies employed by income investors is to use their TFSAs to buy and then hold high-quality dividend-paying stocks for a long time.

TFSAs present an advantage for income investors to hold dividend stocks, as the payouts are not taxable. An investment you make in dividend stocks with strong yields in your TFSA can mean you can accumulate a large amount of wealth coming straight into your pocket without tax deductions.

If you’re a retiree collecting OAS, you don’t need to worry about your earnings counting toward the clawback threshold as you would with taxable trading accounts.

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I’m going to talk about Enbridge Inc (TSX:ENB)(NYSE:ENB) and Capital Power (TSX:CPX). These two stocks are healthy dividend-paying stocks that you should consider buying and holding in your TFSA right now.

Enbridge

Enbridge is the largest pipeline operator in North America with a tasty dividend yield of 6.6%. Trading at $45.49 per share at the time of writing, I think Enbridge could be more than just an excellent dividend-paying stock to buy and hold in your TFSA. The company might even be the best option to consider right now.

The current share prices for Enbridge are quite low. The stock’s price is close to the lowest forward price-to-earnings multiples that Enbridge has had in the past five years. Canadian energy companies across the board are suffering from the problems created by pipeline capacity shortage.

Enbridge is riding the same boat as the rest of the Canadian energy sector. Still, this weakness in share price is potentially an excellent opportunity for income investors looking for assets to hold in their TFSAs. Enbridge regularly grows dividends, and the company is positioned to emerge strongly once the pipeline capacity issues subside.

Another reason why Enbridge presents itself as a juicy option is the rate cuts that the U.S. Federal Reserve and the Bank of Canada are predicted to implement due to economic uncertainties. A $0.73 quarterly dividend payout per share along with the prediction of payouts increasing a further 10% make Enbridge a top dividend-paying stock to consider.

Capital Power

Capital Power is one of those dividend-paying stocks that I feel inclined to call a screaming buy right now. An independent power generation company based in Edmonton, Alberta, Capital Power is a powerhouse with a $3.26 billion market capitalization. The question is: Is the power producer’s stock an excellent buy-and-hold for income investors?

The short answer is a resounding yes.

Capital Power has been busy developing and acquiring new assets over the last few years. The power company has the kind of capital to pursue further expansion. Capital Power’s expansion has allowed the company to move to more significant markets outside of Alberta, an excellent long-term move for the company.

At the time of writing, Capital Power’s share price is $30.51, making the stock considerably more affordable than many other top stocks in the energy sector. It’s unlikely that you can find a lot of power companies with financial stability and such an affordable price per share in the stock market right now.

A dividend yield of 6.3% and a manageable payout of less than 50% of adjusted funds from operators present a fantastic short- and long-term outlook for the Capital Power. The company is so confident in the health of dividends that Capital Power is promising to increase dividends 7% annually through 2021.

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Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool owns shares of Enbridge. Enbridge is a recommendation of Stock Advisor Canada.

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool Canada’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Motley Fool Canada 2019