Canadian retirees seeking reliable passive income have an opportunity to buy top TSX dividend stocks at discounted prices. Buying on dips takes courage and requires the patience to ride out additional downside, but the reward can be significant with higher yields and decent potential capital gains.
Enbridge
Enbridge (TSX:ENB) is a major player in the North American energy infrastructure industry. The company’s transmission networks move 30% of the oil produced in Canada and the United States and about a fifth of the natural gas used by American homes and businesses. Enbridge also owns the largest oil export terminal in Texas and is a partner on the Woodfibre liquified natural gas (LNG) facility being built in British Columbia. Natural gas utilities and a growing renewable energy group round out the assets.
With a market capitalization above $100 billion, Enbridge is among the largest companies listed on the TSX. The company’s size give it the financial firepower to continue to growth through acquisitions and internal projects.
Enbridge is wrapping up its US$14 billion purchase of three natural gas utilities in the United States. The company is also working on a $25 billion secured capital program. As new assets go into service the company expects distributable cash flow (DCF) to rise by 3% per year through 2026 and by 5% beyond that timeframe. This should support steady dividend increases. Enbridge raised the dividend in each of the past 29 years.
Enbridge trades near $49 per share at the time of writing compared to $59 in 2022. Interest rate cuts could put a new tailwind behind the stock. It wouldn’t be a surprise to see ENB retest the $59 mark in the next couple of years.
Investors who buy Enbridge at the current level can get a dividend yield of 7.5%.
Telus
Telus (TSX:T) is another top TSX dividend-growth stock that looks oversold. The communications company has increased its dividend annually for more than two decades. Telus gets most of its revenue from subscriptions to its mobile and internet services delivered across the wireless and wireline networks. Telus doesn’t have a media division, so it isn’t facing some of the same radio and television revenue challenges as its two largest peers. Telus does, however, own other subsidiaries that face some headwinds. Telus International saw revenue fall last year amid a decline in demand for its global call centre and IT services.
Telus cut roughly 6,000 positions over the past year in a restructuring that is designed to position the business to meet financial goals in the current environment. Investors should start to see the benefits later this year and in 2025. Falling interest rates in Canada should also help the bottom line. Telus uses debt to fund part of its capital program, so a drop in borrowing costs will free up more cash for distributions or debt reduction.
Telus trades near $21 at the time of writing compared to $34 in 2022. High interest rates are largely to blame for the decline. Telus expects to deliver 5.5% to 7.5% growth in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2024. Based on this outlook, the stock is probably undervalued. Investors who buy at the current level can get a 7.4% dividend yield.
The bottom line on top stocks for passive income
Enbridge and Telus pay attractive dividends that should continue to grow. If you have some cash to put to work in a portfolio targeting high-yield passive income these stocks deserve to be on your radar.
