A number of great Canadian dividend stocks are down considerably this year due to the Bank of Canada’s sharp increase in interest rates.
Higher rates are designed to cool off the economy and bring inflation under control. That appears to be working and rates could start to fall in 2024. Contrarian investors seeking reliable passive income now have a chance to buy top TSX dividend stocks at discounted prices.
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Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS) trades for close to $57.50 at the time of writing compared to $93 in early 2022.
The steep decline looks overdone, even as the bank faces some economic headwinds. Bank of Nova Scotia raised its dividend earlier this year, so the management team doesn’t appear to be overly concerned about the profit outlook. The bank has a solid capital cushion to ride out a rough patch in the economy and earnings remain robust.
Bank of Nova Scotia recently announced staff cuts of about 3% to adjust to the current market conditions. In addition, investors should get an update on the results of a strategic review that has been underway this year. The new chief executive officer has already made several changes to senior management and is determined to improve investor returns.
At just 9.1 times trailing 12-month earnings, the stock looks priced for a more dire economic situation than is widely expected by economists. Investors who buy BNS stock at the current level can get a 7.3% dividend yield.
Telus
Telus (TSX:T) is targeting consolidated revenue growth of at least 9.5% in 2023. This is down from earlier guidance due to weaker revenue in the Telus International subsidiary that provides multi-lingual call centre and IT services to global clients.
Telus cut staff by 6,000 this year to reduce costs and streamline operations. This will put a dent in free cash flow in 2023 but sets the business up to ride out some economic turbulence. The mobile and internet services groups are still performing well and continue to drive growth.
Telus trades for close to $23 per share at the time of writing compared to $34 at one point last year. The drop is likely exaggerated, considering the essential nature of the company’s core businesses. Investors who buy the dip can get a 6.25% yield from Telus stock. The board has increased the dividend annually for more than two decades.
TC Energy
TC Energy (TSX:TRP) trades for close to $49 per share compared to the 2022 high of around $74. The company faced some issues on its Coastal GasLink pipeline project that more than doubled the cost to at least $14.5 billion. Fortunately, TC Energy says the construction of the pipeline is now complete.
Investors can now focus on the rest of the $34 billion capital program that TC Energy expects to drive adequate revenue and cash flow growth to support planned annual dividend increases of 3-5%. Management is monetizing some assets to raise cash to shore up the balance sheet and help fund the growth initiatives. TC Energy already raised $5.3 billion in 2023, and a spinoff of the oil pipeline division is in the works. A potential sale of the Mexican assets is also under consideration.
Investors who buy TRP stock at the current level can get a 7.6% dividend yield. The dividend has increased annually for more than 20 years.
The bottom line on top TSX dividend stocks
Bank of Nova Scotia, Telus, and TC Energy pay attractive dividends that should continue to grow. If you have some cash to put to work, these stocks look cheap today and deserve to be on your radar.
