Passive Income: 2 Great Canadian Dividend Stocks to Buy on a Pullback

These top TSX dividend stocks look cheap to buy today for a TFSA focused on passive income.

| More on:

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Retirees and other TFSA investors seeking reliable and growing passive income can take advantage of the recent market correction to buy top TSX dividend stocks at undervalued prices.

BCE (TSX:BCE)(NYSE:BCE) trades near $66 per share at the time of writing compared to the 2022 high around $74. Investors can use the dip to buy BCE stock at an attractive price and pick up a solid 5.6% dividend yield.

BCE is investing heavily to upgrade its networks. In 2022, BCE is investing $5 billion across its wireless and wireline infrastructure. The company is expanding its 5G network after spending $2 billion on new 3,500-megahertz spectrum at the 2021 auction. BCE will also connect 900,000 more customer buildings with fibre optic lines this year. These initiatives set the stage for future revenue growth while helping BCE protect its wide competitive moat.

Adjusted earnings per share increased 4.8% in the second quarter (Q2) 2022 compared to the same quarter last year. Free cash flow increased 7.1% and is expected to grow by 2-10% for the year. BCE is on track to hit its 2022 guidance, and investors should see a dividend increase in the 5% range for 2023.

BCE is a good stock to buy if you are searching for a defensive dividend stock that should hold up well through an era of high inflation and a possible recession. The essential mobile an internet services provide steady revenue streams. At the same time, BCE has the power to raise rates when its costs increase.

TC Energy

TC Energy (TSX:TRP)(NYSE:TRP) is a major player in the North American energy infrastructure industry with more than $100 billion in assets and a current market capitalization of $63 billion. The stock looks undervalued at $64 per share today, down from $74 in June before the drop in oil prices sent the entire energy sector into a pullback.

TC Energy is also under pressure on news that it recently issued $1.8 billion in new shares at $63.50 in a bought deal financing to help cover the cost of building a new US$4.5 billion natural gas pipeline in Mexico. The underwriters have a 30-day option to buy another $1.8 billion in stock at the offer price. This will likely keep the stock from moving materially higher in the short term, but investors can take advantage of the recent dip to secure a 5.6% dividend yield.

TC Energy has $28 billion in capital projects on the go that should support steady revenue and cash flow growth. The board raised the dividend in each of the past 22 years and will likely increase the payout by 3-5% annually over the medium term.

TRP is a good stock to buy for investors who want to get exposure to rising demand for North American natural gas. The company already has more than 93,000 km of natural gas pipelines that connect producers to storage locations, utilities, and liquified natural gas facilities.

The bottom line on top stocks to buy for passive income

BCE and TC Energy are leaders in their respective industries and pay growing dividends with above-average 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.

Should you invest $1,000 in BCE right now?

Before you buy stock in BCE, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and BCE wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

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.

The Motley Fool has no position in any of the stocks mentioned. Fool contributor Andrew Walker owns shares of BCE and TC Energy.  

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

analyze data
Dividend Stocks

How I’d Invest $28,000 in Canadian Natural Resource Stock to Amass Personal Wealth

Investing in TSX dividend stocks such as Enbridge can help you earn a passive-income stream in 2025.

Read more »

hand stacks coins
Dividend Stocks

Got $400? How I’d Start Building Income With 3 High-Yield Stocks for the Long Term

These high-yield dividend stocks have a solid payout history, making them compelling investments to generate passive income.

Read more »

A close up color image of a small green plant sprouting out of a pile of Canadian dollar coins "loonies."
Dividend Stocks

I’d Put $15,000 in These 3 Dividend-Growth Champions for Increasing Income Potential

Want to offset some volatility? Here are three defensive dividend-growth champions that can generate a juicy yield right now.

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

Transform Your TFSA Into a Cash-Creating Machine With $7,000

Discover how the Tax-Free Savings Account can be your golden goose for generating cash without losing your investment.

Read more »

monthly desk calendar
Dividend Stocks

How I’d Invest $10,000 in Canadian Value Stocks for Monthly Dividend Income

A $10,000-diversified portfolio of value stocks focusing on dividend safety, yield, growth, and payment schedules can provide a reliable source…

Read more »

a person watches a downward arrow crash through the floor
Dividend Stocks

Is This Correction Your Chance? Top 4 Canadian Dividend Stocks on Sale

Stocks may be down, but now is your chance to get some of these top dividend stocks on sale.

Read more »

Confused person shrugging
Dividend Stocks

Where to Invest $2,500 in the TSX Today

These TSX stocks offer attractive dividends and a shot at decent upside on a rebound.

Read more »

Pile of Canadian dollar bills in various denominations
Dividend Stocks

Invest $25,000 in These Dividend Stocks for $1,956.66 in Annual Passive Income

Dividends stocks can make a huge difference, even if shares don't move an inch. And these might be the best.

Read more »