The market correction picked up its pace in certain TSX sectors in recent weeks. This is giving self-directed Tax-Free Savings Account (TFSA) investors seeking passive income and Registered Retirement Savings Plan (RRSP) investors focused on total returns a chance to buy top Canadian dividend stocks at cheap prices.
BCE
Telecom stock have come under pressure this month after a nice bounce off the 2022 lows. BCE (TSX:BCE) stock trades near $61.50 at the time of writing compared to $65.50 at the beginning of May.
The share price is still above the October low around $56, but investors might want to starting adding BCE stock to their portfolios on any additional downside.
BCE expects to generate higher revenue and more free cash flow in 2023 than it did in 2022. Earnings, however, are forecast to fall due to rising costs, partly caused by higher debt expenses. Investors are concerned that high borrowing rates could persist, as the Bank of Canada keeps rates elevated to tame inflation. A weakening economy will continue to put pressure on advertising revenue in the media division, and the sale of new devices will probably slow, as consumers are forced to keep older phones for longer.
BCE’s core revenue stream, however, should hold up well, even if the economy enters a recession. Businesses and households need mobile and internet services regardless of the economic situation. BCE has a wide competitive moat and can increase prices when its costs rise.
Additional downside could be on the way, but BCE stock already looks attractive at this level. Investors who buy now can get a 6.3% dividend yield. BCE typically increases the payout by about 5% per year.
Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS) is Canada’s fourth-largest bank with a current market capitalization of around $80 billion. The stock has been under pressure for most of the past 12 months, currently trading near $67 compared to $85 a year ago.
The $65 mark has more or less been a floor since October. Bargain hunters seem to see this as an attractive price point to pick up a decent dividend yield and wait for the rebound. Bank of Nova Scotia just reported decent fiscal second-quarter (Q2) 2023 results. Total earnings slipped due to higher provisions for credit losses, but the bank remains very profitable and has ample capital to ride out a downturn.
The new chief executive officer is expected to reveal an overhaul of the business later this year or in early 2024 after a comprehensive strategic review. Bank of Nova Scotia might decide to monetize a large chunk of its international operations that are located in Latin America and deploy the funds in other markets. In the meantime, investors might want to buy the stock while it is out of favour.
Bank of Nova Scotia just announced a dividend increase of 2.9%. The new quarterly distribution of $1.06 per share provides an annualized yield of about 6.3% at the time of writing.
The bottom line on top TSX dividend stocks
Ongoing volatility should be expected in the coming weeks or months and new 12-month lows are certainly possible for BCE and Bank of Nova Scotia. That being said, these stocks already look oversold and pay attractive dividends today that should continue to grow. If you have some cash to put to work, BCE stock and BNS stock deserve to be on your radar.
