Retirees and other dividend investors are searching for good TSX stocks to add to their self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) focused on high dividend yields.
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Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS) trades near $75 per share at the time of writing compared to $93 in early 2022 before the bank sector went into an extended pullback on worries that rising interest rates would trigger a recession.
The shares have rebounded from as low as $55 last fall, driven by a shift in market sentiment from fears of additional rate hikes to expectations of rate cuts in 2024. Despite the bounce, Bank of Nova Scotia has still underperformed its large Canadian peers over the past five years.
That might change going forward as the new chief executive officer implements cost cuts and a strategy transition that will see Bank of Nova Scotia invest more in the United States and Canada to drive growth and less in South America, where the previous leadership directed capital.
Investors who buy BNS stock at the current price can get a dividend yield of 5.65%.
Enbridge
Enbridge (TSX:ENB) is up 30% in the past year. The stock has recouped all of the losses it sustained through the back half of 2022 and the first three quarters of 2023. Interest rates are at play in this story, as well.
Enbridge uses debt to fund part of its growth program. As interest rates soared in Canada and the United States the market worried that Enbridge might have to trim its dividend. Now that the Bank of Canada and the U.S. Federal Reserve are cutting interest rates, investors are moving back into pipeline and utility stocks.
Enbridge recently completed its US$14 billion acquisition of three natural gas utilities in the United States and has a $24 billion capital program on the go to drive growth. Revenue and cash flow from the new assets should support ongoing dividend increases. Enbridge raised the payout in each of the past 29 years. Investors who buy the stock at the current price can get a dividend yield of 6.15%.
Telus
Telus (TSX:T) is a contrarian pick. The stock is down 10% in the past year amid challenging conditions in the Canadian communications sector. Price wars, regulatory uncertainty, and higher debt expenses all hurt the stock. Telus also took a hit from its Telus Digital subsidiary, which has struggled with declining revenue in the past couple of years.
Despite the rough ride, Telus just reported stable third-quarter (Q3) 2024 results and announced another dividend increase. The company doesn’t have a media business, so it isn’t dealing with the same issues as its two largest competitors. Instead, Telus has other growth prospects, including Telus Health, that could be meaningful drivers of revenue growth in the coming years.
Investors who buy Telus at the current level can get a dividend yield of 7.4%.
The bottom line on top TSX dividend stocks
Bank of Nova Scotia, Enbridge, and Telus pay good dividends that should continue to grow. An equal investment in the three stocks today would provide an average yield of 6.4% for a self-directed portfolio targeting high yields.
