The market correction is giving retirees and other investors seeking passive income a chance to buy top TSX dividend stocks at cheap prices. The pullback is driving up yields on great Canadian stocks with good track records of dividend growth.
Enbridge
Enbridge (TSX:ENB) is one of Canada’s largest companies with a current market capitalization of $99 billion. The stock price is below $49 at the time of writing compared to above $59 in early June last year.
Investors who buy ENB stock at the current level can pick up a 7.3% dividend yield. That’s comfortably above the best Guaranteed Investment Certificate (GIC) rates available right now, and the dividend should continue to grow annually.
Enbridge raised the dividend in each of the past 28 years. The size of the increases is smaller than the glory days when the company was building massive new pipelines. Enbridge raised the dividend by about 3% in each of the past two years, and dividend growth of 3-5% per year is probably the norm going forward.
Enbridge is still expanding its asset base with new investments focused on exports and renewable energy. The company is in a partnership to build another wind farm in France. Closer to home, Enbridge is a partner on the construction of the Woodfibre liquified natural gas (LNG) facility being built in British Columbia. The company also purchased an oil export terminal in Texas in 2021 and is building natural gas pipeline infrastructure to feed LNG sites in the United States.
The current $17 billion capital program is expected to support annual earnings per share (EPS) growth of at least 4% for the next few years. Distributable cash flow (DCF) is expected to increase at least 3%.
Based on steady guidance for EPS and DCF expansion, the pullback in Enbridge’s stock price is starting to look overdone.
TC Energy
TC Energy (TSX:TRP) is another major player in the North American energy infrastructure industry. The company is known primarily for its extensive natural gas transmission and storage assets located in Canada, the United States, and Mexico. TC Energy also operates oil pipelines and owns power generation facilities. In total, assets valued at more than $100 billion generate revenue for the company.
TC Energy trades for close to $53 per share at the time of writing. The stock was as high as $74 at the peak last year.
TC Energy has pulled back along with the rest of the energy infrastructure sector. Soaring interest rates are pushing up borrowing costs for capital projects. TC Energy has $34 billion in secured capital developments and is working through a plan to monetize $5 billion in non-core assets to help fund the growth program.
Investors are upset that costs have gotten out of control on the company’s Coastal GasLink project that will eventually transport natural gas from producers in northeastern British Columbia to a new LNG facility on the B.C. coast. The latest update pegs the cost at roughly $14.5 billion, more than double the initial budget. Further delays could push the finally tally above $15 billion, but TC Energy says the project is 87% complete as of the first-quarter 2023 earnings announcement.
Management still expects revenue and cash flow to grow enough to support annual dividend increases of at least 3% over the medium term. TC Energy has increased the payout annually for more than two decades.
At the time of writing, the dividend provides an annualized yield of nearly 7%.
The bottom line on top high-yield TSX stocks
Enbridge and TC Energy pay attractive dividends that should continue to grow. If you have some cash to put to work in a portfolio focused on passive income, these high-yield stocks deserve to be on your radar.
