A market correction is tough to watch, but it also gives investors seeking passive income a chance to buy top TSX dividend stocks at discounted prices for their self-directed Tax-Free Savings Account (TFSA) portfolios.
As a stock falls, the yield on the dividend increases. Companies with reliable and growing distributions tend to see their share prices rebound when the market recovers, so there is also an opportunity to generate capital gains.
Enbridge
Enbridge (TSX:ENB) knows the days of driving rapid growth by building massive new oil pipelines are finished. The energy giant is now focused on steady growth delivered by an assortment of smaller projects spread out across a range of different business segments.
Enbridge sees opportunities emerging in the export of oil and natural gas. The company is also expanding its renewable energy portfolio of solar and wind assets. Looking ahead, Enbridge has the infrastructure and expertise to be a major player in carbon capture and hydrogen.
At the same time, the legacy oil and natural gas pipeline assets remain vital to the smooth operation of the Canadian and U.S. economies. Enbridge moves 30% of the oil produced in the two countries and about a fifth of the natural gas used in the United States.
The $17 billion capital program and any new acquisitions should drive steady earnings and cash flow growth to support ongoing dividend increases. Enbridge raised the payout in each of the past 28 years.
Enbridge trades near $49 per share at the time of writing compared to $59 in early June last year. Investors who buy the pullback can now get a 7.2% dividend yield.
BCE
BCE (TSX:BCE) is another industry leader that pays a great dividend and now looks oversold. The company is Canada’s largest communications business with wireless and wireline networks that provide Canadian businesses and residential clients with mobile, internet, security, and TV services. The media group includes a television network, specialty channels, radio stations, and interests in sports teams. BCE also has retail outlets across the country.
Combined, the portfolio of assets is a powerful business that has the reach to interact with most Canadians on a weekly, if not daily, basis. Each time a person makes a call, checks e-mail, sends a text, streams a movie, watches the news, or checks the sports updates there is a good chance a BCE asset is involved somewhere along the line.
Regulatory issues are always on the radar for BCE and its peers, and in the current economic climate, the media business is suffering from a drop in advertiser spending. BCE just announced an overhaul of the division to reduce expenses, including job cuts and the closing of some radio stations.
Overall company revenue, however, is still expected to grow in 2023, as is free cash flow.
That’s good news for dividend investors. BCE raised the payout by at least 5% in each of the past 15 years, and the trend should continue. At the time of writing, BCE stock provides a 6.4% annualized yield.
The bottom line on top stocks for passive income
Enbridge and BCE are TSX sector leaders with attractive dividends that should continue to grow. If you have some cash to put to work in a TFSA targeting passive income, these stocks deserve to be on your radar.
