The pullback in the stock market over the past 12 months is giving pensioners a chance to buy top Canadian dividend-growth stocks at discounted prices. Market corrections can be tough to watch, but they also tend to drive up the yield retirees can get from great TSX dividend payers.
This is important for investors who need to get the highest return possible on their retirement savings without putting the principal at too much risk.
CIBC
CIBC (TSX:CM) recently reported solid results for the fiscal second quarter (Q2) of 2023. The bank generated adjusted net income of $1.63 billion compared to $1.65 billion in the same period last year. Revenue actually increased by more than $300 million, but higher provisions for credit losses led to a decline in profits.
CIBC finished the quarter with a common equity tier-one (CET1) ratio of 11.9%. This is a measure of the bank’s ability to ride out tough times. Canadian banks are required to have a CET1 ratio of 11%, so CIBC is sitting on ample excess cash.
The board raised the quarterly dividend from $0.85 to $0.87 when it announced the fiscal Q2 results. At the current share price near $57, the stock provides a dividend yield of 6.1%.
Bank stocks are out of favour right now, as investors worry that aggressive rate hikes by the Bank of Canada and the U.S. Federal Reserve will trigger a wave of loan defaults. Loan losses are definitely expected to increase, but the Canadian banks are well capitalized, and the fears might be overblown.
Additional downside is definitely possible, but CIBC’s stock looks cheap right now, and the dividend should be rock solid.
TC Energy
TC Energy (TSX:TRP) doesn’t produce oil or natural gas. The company simply moves the commodities from production sites to storage facilities, refineries, utilities, or export terminals and charges a fee for providing the service. As such, changes in the prices of oil or natural gas in the global market have limited direct impact on TC Energy’s revenue stream.
In fact, as long as energy demand is robust and pipelines are full, TC Energy should perform well. Pipeline stocks, however, often fall in step with producer stocks when energy prices slide. These dips should be good buying opportunities.
TC Energy is primarily focused on the transmission and storage of natural gas, but the company also has oil pipelines and power-generation facilities. Natural gas demand, both domestic and global, is expected to grow as power producers switch to the fuel from oil and coal.
TC Energy is working through a $34 billion capital program that is expected to support annual dividend increases of at least 3% over the medium term. At the current share price near $55, TC Energy looks a bit oversold, and investors can get a decent 6.75% dividend yield.
The bottom line on top stocks for passive income
CIBC and TC Energy pay attractive dividends that should continue to grow. If you have some cash to put to work in a portfolio targeting passive income, these stocks deserve to be on your radar.
