Retirees targeting passive income in a Tax-Free Savings Account (TFSA) and younger investors using their Registered Retirement Savings Plan (RRSP) to build wealth are searching for reliable TSX dividend stocks that pay growing distributions in all economic conditions.
Soaring interest rates designed to slow the economy and lower inflation could trigger a recession in the next 12-18 months. As such, it makes sense to put new money to work in top dividend-growth stocks.
A number of great Canadian dividend payers now trade at discounted prices.
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Telus
Telus (TSX:T) gets most of its revenue from mobile and internet service subscriptions. These are needed by businesses and residential customers, regardless of the state of the economy, so the core revenue stream should hold up well during an economic downturn.
Telus completed its copper-to-fibre capital program last year and is now focused on building out its 5G network. Total capital outlays will be about $1 billion less in 2023 than in 2022. This means more cash flow should be available for dividend increases and share buybacks. Telus typically increases its dividend by 7-10% per year.
Telus stock trades below $26 at the time of writing compared to more than $34 at the high last year. Investors can now get a 5.6% dividend yield.
Fortis
Fortis (TSX:FTS) increased its dividend in each of the past 49 years, and management intends to boost the distribution by at least 4% annually through 2027.
Fortis operates power generation, electricity transmission, and natural gas-distribution utilities in Canada, the United States, and the Caribbean. It is important to note that 99% of the $65 billion asset base generates rate-regulated revenue that tends to be predictable and reliable.
Fortis is working on a $22.3 billion capital program that will increase the rate base by an annual rate of about 6% over five years. The resulting increase in cash flow should support the targeted dividend hikes.
Fortis trades for close to $57 at the time of writing. The stock was as high as $65 at one point last year. Investors who buy now can get a 4% dividend yield.
The bottom line on top Canadian dividend stocks to own during a recession
Telus and Fortis pay attractive dividends that should continue to grow. If you have some cash to put to work in a self-directed TFSA or RRSP, these stocks deserve to be on your radar.
