The latest market downturn is giving investors who missed the rally off the 2002 crash a new opportunity to buy top TSX dividend stocks at discounted prices. Buying quality dividend-growth stocks on dips is a contrarian strategy that can be scary during volatile times in the market. However, good companies that steadily raise their distributions tend to see their share prices recover when sentiment shifts.
TC Energy
TC Energy (TSX:TRP) is primarily a natural gas transmission company with 93,000 km of natural gas pipelines and 650 billion cubic feet of natural gas storage capacity in Canada, the United States, and the Caribbean. Oil pipelines and power generation facilities round out the asset mix.
TRP stock trades below $48.50 at the time of writing compared to $70 during the summer of 2022.
TC Energy is working on a $34 billion capital program that is expected to drive enough revenue and cash flow growth to support planned annual dividend increases of 3% to 5% over the next few years. The board has increased the payout annually for more than two decades. Investors who buy TRP stock at the current level can get a 7.7% dividend yield.
Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS) increased its dividend earlier this year. The bank continues to deliver strong profits even as high interest rates reduce loan growth and push some borrowers into difficult positions.
All the big banks are setting aside more cash to cover potential bad loans. This trend is expected to continue while the Bank of Canada keeps interest rates elevated to slow down the economy and bring inflation under control.
Economists widely expect a short and mild economic contraction and calls for rate cuts in 2024 are becoming more common. In a soft landing scenario, Bank of Nova Scotia looks oversold today. The stock trades near $62 per share at the time of writing compared to $93 in early 2022.
Ongoing volatility should be expected, but investors who buy at the current level get paid a decent 6.8% dividend yield while they wait for the rebound.
BCE
BCE (TSX:BCE) is Canada’s largest communications company with a current market capitalization near $47 billion. The company gets most of its revenue from mobile and internet subscription services. These tend to be essential for commercial and residential clients, regardless of the state of the economy.
BCE stock trades near $51.50 at the time of writing compared to more than $73 at the 2022 peak. The drop looks overdone considering the quality of the core revenue stream. Management expects revenue and free cash flow to grow in 2023, even as the media division faces a slowdown in ad spending.
BCE increased the dividend by at least 5% in each of the past 15 years. At the time of writing, the stock offers a 7.5% dividend yield.
The bottom line on cheap TSX dividend stocks
Ongoing market turbulence is likely to occur until there is clarity on the peak for rate hikes. That being said, TC Energy, Bank of Nova Scotia, and BCE all pay attractive dividends that should continue to grow and now trade at big discounts to their 2022 highs. If you have some cash to put to work, these stocks deserve to be on your radar.
