A market pullback gives retirees and other income investors an opportunity to buy top TSX dividend stocks for self-directed Tax-Free Savings Account (TFSA) portfolios focused on generating reliable and growing passive income.
TC Energy
TC Energy (TSX:TRP) is a key player in the North American energy infrastructure industry with more than $100 billion in assets located across Canada, the United States, and Mexico. The company’s core operations focus on natural gas, including 93,000 km of pipelines and 650 billion cubic feet of storage. TC Energy also has power-generation facilities that round out the revenue stream.
TRP stock has been on a downward trend for most of the past year. This is largely due to the broader pullback in the energy infrastructure sector. However, TC Energy has also struggled with cost issues on a major project. The Coastal GasLink pipeline that will bring natural gas from Canadian producers to a new liquified natural gas (LNG) facility on the coast of British Columbia is now expected to cost at least $14.5 billion, which is more than double the initial budget. This is frustrating for investors, but the development is nearly 90% complete, so there shouldn’t be too much more pain.
TC Energy’s total capital program stands at close to $34 billion. Management is still targeting dividend growth of at least 3% per year over the medium term, supported by anticipated increases in cash flow as new developments go into service. The board has raised the payout annually for more than two decades.
Investors who buy TRP stock at the current price as of writing near $55.50 can get a 6.7% dividend yield.
CIBC
CIBC (TSX:CM) ranks as Canada fifth-largest bank with a current market capitalization near $52 billion. The stock trades for close to $57 per share at the time of writing compared to $70 in June last year. Bank stocks have been under pressure amid fears that recent failures of some banks in the United States could be the tip of the iceberg. Canadian banks are widely viewed as being much safer than most of their U.S. peers due to robust capital levels, strong profitability, and diversified revenue streams. As such, selling stocks of the big TSX banks due to fears about problems arising among the American regional banks is probably excessive.
This doesn’t make CIBC and the other Canadian banks immune to issues in the global financial markets. In fact, all the banks increased provisions for bad loans when they reported fiscal second-quarter (Q2) 2023 results. The steep rise in interest rates on both sides of the border over the past year is putting pressure on commercial and retail borrowers with too much debt.
In Canada, CIBC has the largest relative exposure to the residential housing market among the big banks. This might be one reason the stock remains under pressure.
Ongoing challenges are expected as rates continue to go up, but CM stock already looks cheap and CIBC has adequate capital to ride out rough times. The board just increased the dividend, so management can’t be overly concerned about the profits outlook over the next couple of years.
Investors looking for meaningful capital gains will probably have to be patient, but you get paid a solid 6% dividend yield at the current share price.
The bottom line on top TSX dividend stocks
Ongoing volatility should be expected, and additional downside is possible. That being said, TC Energy and CIBC already appear oversold and pay attractive dividends that should continue to grow. If you have some cash to put to work, these stocks deserve to be on your radar.
