The 2022 market correction is finally providing retirees and other investors focused on generating high-yield tax-free income with a chance to buy top TSX dividend stocks at undervalued prices for a TFSA portfolio.
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Pembina Pipeline
Pembina Pipeline (TSX: PPL)(NYSE: PBA) trades for less than $46 per share at the time of writing compared to $53 in early June. The drop over the past few weeks came about as investors unloaded everything connected to the oil and gas sector. Profit taking in the producers was expected, as oil and natural gas prices gave back some gains, but the selloff in the midstream stocks appears overdone.
Pembina Pipeline is a one-stop shop for energy producers who need to get their product to the market. The company operates pipelines, logistics, and natural gas gathering and processing businesses in Canada and the United States.
The company has a proven track record of growth driven by strategic acquisitions and organic projects. Pembina Pipeline isn’t afraid to make bold moves and most have worked out to benefit investors. The rebound in energy prices will eventually nudge producers to start investing more in production growth. This should drive increased demand for Pembina Pipeline’s services.
Management is using excess cash to reduce debt and buy back stock in 2022. Investors could see a nice dividend hike next year. At the current share price, Pembina Pipeline stock provides a 5.5% dividend yield.
BCE
BCE (TSX: BCE)(NYSE: BCE) raised the dividend by at least 5% in each of the past 14 years, and investors should see the solid trend continue. Free cash flow is expected to increase by 2-10% in 2022, even as BCE spends heavily on capital projects. The company plans to connect an additional 900,000 building with high-speed fibre optic lines this year. BCE is also expanding its 5G mobile network. The investments provide customers with the broadband capacity they need across multiple platforms for work and entertainment.
BCE generates reliable cash flow and should see revenue growth emerge as a result of the fibre and 5G investments. The stock has been a top pick among retirees seeking reliable income for decades, and that should remain the case for the coming years.
Investors can now buy BCE stock on a nice dip. The shares trade for $63 at the time of writing compared to $74 in April. The business outlook hasn’t changed very much in two months to justify such a steep drop. BCE looks undervalued here and offers a 5.8% dividend yield.
This should be a good, defensive stock to add to the portfolio for investors who are concerned that a recession is on the way in the next couple of years.
The bottom line on top stocks for passive income
Pembina Pipeline and BCE pay high-yield dividends and look attractive after the recent market correction. If you have some cash to put to work in a TFSA focused on passive income, these stocks deserve to be on your radar.
