The recent plunge in the TSX Index is finally giving TFSA income investors a chance to buy top dividend stocks that now offer above-average yields.
TC Energy
TC Energy (TSX: TRP)(NYSE: TRP) fell from a recent high of $74 per share to the current price near $65 amid a market selloff in oil and gas prices. The company, however, isn’t an oil and natural gas producer. TC Energy simply provides transportation and storage services to producers who need to move the commodities from the production sites to customers.
TC Energy’s revenue outlook hasn’t changed in the past couple of weeks, so the big pullback in the stock price appears overdone. Investors who buy at the current level can pick up a solid 5.5% dividend yield and wait for the next payout hike to boost the return.
TC Energy has a $25 billion capital program on the go that will generate enough revenue and cash flow growth to support annual dividend increases of at least 3% over the medium term.
Great-West Lifeco
Great-West Lifeco (TSX: GWO) owns insurance, wealth management, and asset management businesses in Canada, the United States, and Europe. Subsidiaries include Canada Life and Irish Life, as well as Empower and Putnam in the United States.
Net earnings Q1 2022 rose to $0.83 per share from $0.76 in the same period last year.
The board raised the dividend by 12% late in 2021 and Great-West Lifeco is buying back up to 2.15% of its outstanding stock under the current share-repurchase plan. Another solid dividend increase should be on the way for 2023.
The stock trades near $30.50 at the time of writing compared to $41.50 earlier this year. The pullback looks overdone, and investors can now get a 6.4% dividend yield.
BCE
BCE (TSX: BCE)(NYSE: BCE) trades for less than $62 per share at the time of writing compared to nearly $74 just two months ago. The shares now provide a solid 6% dividend yield and offer decent upside potential when the market recovers.
BCE gets most of its revenue from services that people and businesses need regardless of the state of the economy. Mobile communications and internet subscriptions won’t get cut, as budgets tighten due to high inflation or an economic downturn. Even the TV and streaming subscriptions will outlast many other discretionary household expenses.
BCE has the power to raise prices when it needs additional cash to cover rising costs. The company is also investing billions of dollars to run fibre optic lines and build a 5G mobile network. These capital programs help protect the competitive position while setting BCE up for revenue growth.
Free cash flow is expected to grow by 2-10% in 2022, so another dividend increase in the range 5% should be on the way for 2023.
The bottom line on top, high-yield stocks
TC Energy, Great-West Lifeco, and BCE are all top dividend stocks that look undervalued right now and offer above-average dividend yields. If you have some cash to put to work in a TFSA focused on passive income, these stocks deserve to be on your radar.
