2 Magnificent TSX Dividend Stocks Down +22% to Buy and Hold Forever

Value investors focused on income should take a closer look at these two TSX stocks.

| More on:
happy woman throws cash

Source: Getty Images

Falling stock prices can be tough for investors to stomach. However, there are opportunities hidden within these challenges. Here are two magnificent dividend stocks on the Toronto Stock Exchange (TSX) that have fallen by over 22%, offering investors an attractive opportunity to buy and hold for the long term.

TD Bank: A dividend giant with recovery potential

Toronto-Dominion Bank (TSX:TD) has faced its share of struggles over the last few years. Yesterday, after releasing its earnings report, the Canadian bank stock saw its stock drop by another 7%. With uncertainty hanging over the bank, investors are understandably cautious. TD’s recent US$3.09 billion anti-money-laundering settlement in the United States and its subsequent strategic review have raised concerns about its growth outlook. Additionally, the current chief executive officer departing and the announcement of an internal successor (the current chief operating officer) have added to the instability.

Despite these challenges and changes, TD has continued to grow its dividend. The bank raised its payout by 2.9% yesterday, now providing a 5.7% yield. Currently trading at approximately $74 per share, this marks a 22% drop from its 2021 peak of around $95. Historically, TD’s dividend yield has reached as high as 6%, and even at its current rate, it remains a strong candidate for long-term investors.

Though 2025 may bring further turbulence due to leadership transitions and the ongoing strategic review, there’s clear value in the heightened dividend income that TD provides. Investors can lock in this high yield now and potentially benefit significantly when the stock rebounds.

TELUS: A telecom giant with a big dividend

TELUS (TSX:T) is another blue-chip stock that has underperformed in recent years. Like many large telecoms, TELUS reached its peak in 2022, just before the Bank of Canada began raising interest rates. While rates have cooled somewhat, TELUS faces additional challenges in the form of heightened competition from new entrants in the market.

Even with these headwinds, TELUS has consistently increased its dividend payout. The company raised its quarterly dividend by 3.4% to $0.4023 per share last month, marking a year-over-year increase of 7%. Currently, at about $22 per share — down 26% from its 2022 high — TELUS offers an impressive 7.3% dividend yield.

This consistent dividend growth, with plans to increase payouts by 7-10% annually through 2025, adds an extra layer of security for investors. The stock’s current price offers a reasonable entry point, with analysts projecting a 9-10% upside over the next 12 months. So, not only do investors enjoy a lucrative yield, but they also have the potential for price appreciation as the market recovers.

Why buy and hold?

Both TD and TELUS have weathered storms before, and their long histories of dividend growth make them compelling choices for income-seeking investors. While they are currently down over 22%, their big dividend yields — TD’s 5.7% and TELUS’s 7.3% — provide a solid foundation for returns. As the stocks stabilize and the companies navigate their respective challenges, there’s potential for both consistent income and capital appreciation.

These TSX dividend stocks are out of favour now, but with a long-term view, they could turn out to be magnificent stocks five years down the road.

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.

Fool contributor Kay Ng has positions in TELUS and Toronto-Dominion Bank. The Motley Fool recommends TELUS. The Motley Fool has a disclosure policy.

More on Dividend Stocks

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

New TFSA Contribution Room in 2025: Where to Invest the $7,000 Limit

If you wish to play it safe and utilize your 2025 TFSA contribution room with a stock you can safely…

Read more »

3 colorful arrows racing straight up on a black background.
Dividend Stocks

TFSA 2025: 1 Stock to Turn Your $7,000 Contribution Into a Dividend Growth Powerhouse

CN Rail (TSX:CNR) stock is getting way too cheap to ignore by investors seeking value and dividends in 2025.

Read more »

people relax on mountain ledge
Dividend Stocks

3 Dividend Stocks to Help You Achieve Financial Freedom

Dividend investing is a proven strategy for providing regular folks a crack at the elusive dream.

Read more »

A meter measures energy use.
Dividend Stocks

Canadian Utilities Stocks Poised to Win Big in 2025

Here are three top Canadian utilities stocks long-term investors may want to consider as we kick off a new year.

Read more »

Hourglass and stock price chart
Dividend Stocks

These Canadian Stocks Have a Legit Shot at Doubling in 5 Years

Three Canadian stocks with visible growth potential could double in value in five years.

Read more »

Investor wonders if it's safe to buy stocks now
Dividend Stocks

Canadian Tire: Buy, Sell, or Hold in 2025?

Given its 4.6% dividend yield and reasonable valuation, Canadian Tire stock seems to be a "hold" going into 2025.

Read more »

dividend growth for passive income
Dividend Stocks

3 Reliable Dividend Stocks to Lean On in Uncertain Times

These Canadian dividend stocks are most likely to pay and increase their distributions regardless of economic and market conditions.

Read more »

Man holds Canadian dollars in differing amounts
Dividend Stocks

Bill Ackman Is Betting On This TSX Stock –– And It’s a Deal Right Now

Here's why Restaurant Brands (TSX:QSR) is a top holding of hedge fund manager Bill Ackman right now.

Read more »