Retirees: 2 High-Yield Dividend Stocks to Buy for Passive Income

Top TSX dividend stocks are on sale.

| More on:

The correction in the share prices of many top TSX dividend stocks is giving retirees and other investors seeking passive income a chance to buy great Canadian dividend stocks at cheap prices.

BCE

BCE (TSX:BCE) is a good example of a dividend-growth stock that looks oversold and now offers a high yield. The shares trade below $52 at the time of writing compared to $65 earlier this year.

The decline might be exaggerated, considering the company’s core mobile and internet services businesses are needed by customers in all economic conditions and generate steady revenue and cash flow.

BCE continues to make investments to drive future growth. The company spent about $5 billion last year on capital initiatives, including the 5G mobile network and the expansion of fibre-optic lines to the premises of its customers. These projects are expensive, but they help protect BCE’s competitive position and should lead to revenue expansion in the coming years. BCE’s share price pullback is largely due to the sharp increase in interest rates that is driving up debt costs. Once the Bank of Canada signals it is done raising rates to fight inflation, there could be a meaningful rally.

On the operational side, BCE’s media business is struggling with lower ad sales across the TV and radio platforms. This trend could continue for some time, but the media division is small compared to the core mobile and internet operations that continue to perform well.

BCE expects profits to dip this year due to higher borrowing costs, but overall revenue and free cash flow are predicted to grow. That should support the dividend heading into 2024. BCE increased the payout by at least 5% annually over the past 15 years. Investors can currently get a 7.5% dividend yield on BCE stock.

CIBC

CIBC (TSX:CM) increased its dividend earlier this year. That should be a signal to investors that the management team is confident in the bank’s ability to continue to generate solid profits, even as rising interest rates drive up provisions for loan losses and create economic headwinds.

CIBC stock trades near $48 per share at the time of writing. It was as high as $83 in early 2022. Bank stocks are broadly under pressure as investors worry that the Bank of Canada and the United States Federal Reserve will trigger a deep economic decline as they battle to get inflation back to the 2% target. Inflation in September was just under 4%.

Rate hikes take time to work their way through the economy. This lag is the reason investors think interest rates have potentially gone too high and might stay elevated for too long. In the scenario where a deep recession occurs and unemployment surges, there could be a wave of commercial and household bankruptcies.

That being said, economists widely expect a soft landing for the economy. If that situation materializes, CIBC is probably oversold today. The bank remains very profitable, and management has built up a solid capital cushion to ride out difficult times.

Investors who buy CM stock at the current level can get a 7% dividend yield.

The bottom line on high-yield stocks for passive income

BCE and CIBC pay attractive dividends that should continue to grow. If you have some cash to put to work in a portfolio focused on passive income, these stocks look cheap today and deserve to be on your radar.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker owns shares of BCE.

More on Dividend Stocks

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

Where to Invest Your $7,000 TFSA Contribution

The TFSA is attractive for investors who want to generate tax-free passive income.

Read more »

The TFSA is a powerful savings vehicle for Canadians who are saving for retirement.
Dividend Stocks

TFSA Investors: 3 Dividend Stocks Worth Holding Forever

These TSX stocks have the potential to grow their dividends over the next decade, making them top investments for TFSA…

Read more »

Tractor spraying a field of wheat
Dividend Stocks

Is Nutrien Stock a Buy for its Dividend Yield?

Nutrien is down more than 50% form the 2022 highs. Is NTR stock now oversold?

Read more »

golden sunset in crude oil refinery with pipeline system
Dividend Stocks

Best Stock to Buy Right Now: Enbridge vs TC Energy?

Enbridge and TC Energy rebounded nicely over the past year. Are more gains on the way?

Read more »

Electricity transmission towers with orange glowing wires against night sky
Dividend Stocks

2 Utility Stocks That Are Smart Buys for Canadians in November

Are you looking for some of the smart buys to consider in November? These utility stocks offer growth and a…

Read more »

View of high rise corporate buildings in the financial district of Toronto, Canada
Dividend Stocks

Is Power Corporation of Canada Stock a Buy for its 5% Dividend Yield?

Is Power Corporation of Canada (TSX:POW) stock's 5% dividend yield worth it? Discover why this resilient stock could be a…

Read more »

hand stacks coins
Dividend Stocks

Here Are My Top 3 Dividend Stocks to Buy Now

These three dividend stocks are ideal for strengthening your portfolio and earning a stable passive income.

Read more »

man touches brain to show a good idea
Dividend Stocks

3 No-Brainer REIT Stocks to Buy Right Now for Less Than $200

REITs have long been touted as some of the best dividend stocks out there if you want recurring, strong income.…

Read more »