Retirees and other investors seeking high-quality passive income can still buy top TSX dividend stocks at discounted prices for a self-directed Tax-Free Savings Account (TFSA) portfolio.
BCE
BCE (TSX:BCE) is Canada’s largest communications firm with a current market capitalization near $49 billion. The stock came under heavy pressure in the past six months, as investors reacted to soaring interest rates and some revenue challenges in BCE’s media division. The stock trades for close to $53 at the time of writing compared to $65 in May and more than $73 at the high point last year.
The drop looks overdone when you consider the fact that BCE is on track to generate revenue growth and free cash flow growth in 2023. Earnings are expected to slip a bit due to higher borrowing costs, but that should be a temporary effect. The Bank of Canada is expected to begin lowering interest rates next year as inflation moves back to the 2% target.
BCE’s core mobile and internet subscription businesses deliver services that households and companies need, regardless of the economic conditions. This should make BCE a good stock to own during a recession.
BCE increased the dividend by at least 5% in each of the past 15 years. At the very least, the dividend should be safe heading into 2024. Investors who buy BCE stock at the current level can get a 7.25% dividend yield.
Fortis
Fortis (TSX:FTS) isn’t as cheap as it was in early October, but the stock is still way off the 2022 high. At the time of writing, FTS trades near $55 compared to more than $64 at the peak last year.
Fortis is a good example of a quality dividend stock that investors can buy and simply sit on for decades to earn reliable passive income. The board has increased the dividend annually for the past 50 years and intends to boost the payout by 4% to 6% per year through at least 2028.
Fortis is working on a $25 billion capital program that is expected to boost the rate base by a compound annual rate of better than 6% over the next five years. As the new assets are completed and go into service, there should be adequate cash flow growth to support the planned dividend increases.
Fortis provides a 4.25% dividend yield at the current share price. This is lower than investors can get from other dividend stocks, but the steady distribution increases will boost the yield on the initial investment. Buying Fortis on dips has historically proven to be a savvy move for investors seeking capital appreciation along with the dividend income.
The bottom line on top TSX stocks for passive income
BCE and Fortis 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 for a portfolio focused on passive income.
