Passive-Income Stocks: 2 TSX Dividend Giants to Buy Right Now

Invest in BCE (TSX:BCE)(NYSE:BCE) and another top Canadian dividend stock to dodge inflation’s punch.

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The stock market has been quite hostile to new investors, with Federal Reserve interest rate fears and a recession likely on the way. Undoubtedly, there are many pockets of undervaluation still on the TSX Index today. However, don’t expect investors to pounce at the below-average price-to-earnings (P/E) ratios so quickly, given the list of woes.

Indeed, recessions tend to take a bite out of corporate earnings. And if the earnings hit is large enough, today’s low P/E multiples may not represent undervaluation in the traditional sense. Those with short-term time horizons will likely find it increasingly difficult to make money, as the wild swings move in both directions.

Indeed, we’ve witnessed colossal multi-week winning streaks be followed by equally remarkably multi-week losing streaks. Though the bear market may not be tamed anytime soon, longer-term thinkers with investment horizons measured in years rather than weeks should not hesitate to take advantage of the fallen market darlings.

Some earnings erosion may be baked into markets ahead of a 2023 economic recession. But many investors may be underestimating the ability of well-run firms to power through a downturn. In this piece, we’ll have a closer look at two cheap stocks that seem more like buys than sells as their dividend yields continue to increase with every dip.

Without further ado, consider shares of Enbridge (TSX:ENB)(NYSE:ENB) and BCE (TSX:BCE)(NYSE:BCE), two dividend heavyweights with yields close to 6%.

Enbridge

Enbridge is a pipeline kingpin with one of the most enticing dividends in the entire market. The 6.3% dividend yield isn’t just bountiful, but it’s well supported by cash flows and is likely subject to continued double-digit growth moving forward.

Indeed, the energy industry has been on quite a powerful bull run over the past year. Though the broader basket of oil and gas stocks has slipped into correction (some of the names fell into a bear market), Enbridge is well on its way to continue powering to new highs, given its low sensitivity to those weekly commodity price fluctuations.

At the end of the day, Enbridge transports in-demand energy from one place to another. As long as energy prices don’t collapse as violently as they did in early 2020, it will be relatively smooth sailing for the dividend giant, as it continues pursuing new growth projects. Growth to be had in liquified natural gas (LNG) transportation within North America is one of the most intriguing areas of growth for the firm moving forward.

At writing, the stock trades at 22.79 times P/E, well below the five-year historical average of 27.6. With strong demand for domestic energy, I view Enbridge as more of a cash flow-generative utility than a volatile energy stock.

BCE

BCE is the telecom titan many Canadian retirees own for the huge payout. At writing, the yield stands at swollen 5.8%, thanks in part to the stock’s recent plunge. Down around 14% from its high, BCE stock seems like a great investment to help investors dodge and weave past inflation’s blow.

With inflation at 7.6%, the dividend yield may not be able to fully absorb the impact of the price increases. That said, the Bank of Canada has shown it’s more than willing to do whatever it takes to tame the beast that is inflation. As more 75-100-basis-point rate hikes come in, it’s hard to believe that inflation will stay at these heights by this time next year.

As inflation retreats and BCE’s dividend continues to grow, the long-time retiree staple will be back to helping investors build meaningful wealth. In the meantime, BCE’s rock-solid payout can help make today’s inflation hailstorm just a bit less painful.

The stock trades at 20.45 times its P/E, which is pretty much in line with the five-year historical average of around 20 times.

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 Joey Frenette has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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