The pullback in the share prices of some of Canada’s top dividend stocks is giving investors a chance to buy great TSX names at discounted prices for portfolios focused on passive income or total returns. Pensioners can get great yields to boost their retirement income while younger investors can harness the power of compounding by using the dividends to buy new shares.
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BCE
BCE (TSX:BCE) is Canada’s largest communications firm with a market capitalization near $55 billion. The stock has dropped from $74 last spring to the current price near $60 in a move that appears overdone, despite the economic headwinds.
In the first quarter (Q1) of 2023 earnings report BCE said it expects full-year revenue and full-year free cash flow to be higher than 2022, supported by strength in the core wireless and internet subscription services. Earnings are expected to drop a bit due to higher debt costs caused by rising interest rates.
BCE’s media business faces some challenges with a decline in ad spending that is likely to continue if the economy goes into a recession. The company just announced the elimination of 1,300 jobs and is closing six radio stations to reduce costs.
BCE raised the dividend by at least 5% in each of the past 15 years, and steady dividend growth should continue, supported by the wireline and wireless network revenue stream and robust free cash flow. Investors who buy the stock at the current price can pick up a solid 6.4% dividend yield.
Canadian Natural Resources
Canadian Natural Resources (TSX:CNQ) raised its dividend in each of the past 23 years and has provided investors with a compound annual dividend-growth rate of better than 20% over that timeframe.
The company is Canada’s largest oil and gas producer by market capitalization and has the balance sheet strength to make strategic acquisitions during downturns to drive long-term revenue and profit growth.
CNRL has a balanced portfolio of energy production assets that span the oil and natural gas spectrum, including oil sands, conventional heavy oil, conventional light oil, offshore oil, natural gas liquids, and natural gas. Exports are expected to increase in the coming years, and CNRL is positioned well to benefit.
CNQ stock trades near $73 at the time of writing compared to $88 at the peak last year. Investors can now get a 4.9% dividend yield.
Fortis
Fortis (TSX:FTS) has increased its dividend annually for nearly five decades. The board intends to raise the payout by at least 4% per year through 2027, supported by the current $22.3 billion capital program.
Fortis owns rate-regulated utility businesses in Canada, the United States, and the Caribbean. The $65 billion in assets includes power generation, electricity transmission, and natural gas distribution operations. These tend to be recession-resistant revenue streams as people and businesses need to use electricity and natural gas, regardless of the state of the economy.
FTS stock trades near $56.50 at the time of writing compared to a high above $64 at one point last year. The current dividend yield is 4%.
The bottom line on top TSX dividend stocks
BCE, CNRL, and Fortis all pay attractive dividends that should continue to grow. If you have some cash to put to work in a self-directed portfolio targeting income or total returns, these stocks deserve to be on your radar.
