Retirees and other investors are looking for the best dividend-paying stocks to add to their TFSA portfolios focused on generating reliable, tax-free passive income. The market pullback gives investors a chance to buy some of the best dividend-paying stocks at undervalued prices.
Great-West Lifeco (TSX: GWO) is a Winnipeg-based insurance, wealth management and asset management company with businesses located in Canada, the United States and Europe.
The company reported strong results in the first quarter of 2022, with net profit up 9% year-over-year to $809 million. This is a strong performance considering the increase in claims in certain group insurance plans due to the outbreak of COVID-19 during the quarter.
Return on equity increased to 14.7% in the first quarter from 13.6% in the first quarter of 2021.
The stock is down to $33.50 at the time of writing, from the 2022 high of $41.50. At the current price, investors can earn a return of 5.8%. Great-West Lifeco increased the dividend by 12% at the end of last year. Another generous increase is expected to be on the way for 2023.
Higher interest rates are on the way, which tends to be positive for insurance companies, as businesses can generate better returns on the cash they need to set aside for potential claims.
Enbridge (TSX:ENB)(NYSE:ENB) is benefiting from the rebound in the global energy sector. The stock is near its 12-month high, and more gains should be on the way over the next few years as investments in oil and natural gas export-focused assets drive revenue growth.
Enbridge spent US$3 billion late last year to buy a strategic oil export facility and connected pipeline assets in Texas. The timing proved perfect before demand for North American crude surged as major international producers struggled to ramp up production due to a lack of investment over the past two years. Moreover, the sanctions against Russia and the continued political instability in other producing countries will not go away in the short term.
Enbridge is also expanding its pipeline infrastructure to connect natural gas producers to new LNG facilities on the US Gulf Coast. Europe is in a rush to get liquefied natural gas from the United States as it seeks to end its dependence on Russia.
Canadian and U.S. oil and natural gas will continue to be in strong demand for some time, both domestically and internationally, which bodes well for Enbridge’s pipeline and storage business. . The company already transports 30% of the oil produced in the United States and Canada and 20% of the natural gas used by the Americans.
Reliable natural gas utilities and a growing renewable energy division complement the asset portfolio, ensuring a balanced revenue stream. Enbridge has the financial clout to make new acquisitions to drive growth and sees opportunities in the asset base for new capital projects.
The dividend is expected to increase in line with the expected growth in distributable free cash flow in the coming years. Investors who buy Enbridge shares at the current level can earn a return of 5.9%.
The bottom line on the best stocks for passive income
Great-West Lifeco and Enbridge pay attractive high-yield dividends that should continue to grow. If you have money to invest in a TFSA focused on passive income, these stocks deserve to be on your radar.