2 Oversold TSX Dividend Stocks for Passive Income

Enbridge (TSX:ENB)(NYSE:ENB) and National Bank of Canada (TSX:NA) stock look like dividend bargains to load up on ahead of a turbulent year.

| More on:
Various Canadian dollars in gray pants pocket

Image source: Getty Images

It’s a tough time to be a passive-income investor, with markets flirting with the lows not seen since June. Undoubtedly, the stock market doesn’t have a lot to react to until the next Consumer Price Index (CPI) report or major Fed statement. That’s rattling to many investors who tune into the overly bearish financial television shows that warn of a global recession on the horizon. It’s all we’ve heard of late. A recession as a result of Fed-mandated rate hikes. It’s tough to find anything to be optimistic about when so many have already thrown in the towel and have given up hope amid the ongoing bear market.

With panic and fear in the hearts of investors, it seems like everyone is more comfortable with foregoing huge gains in a relief rally if it means avoiding what could be further capital losses. Now, the big question right now is whether a recession is baked in. Though stocks haven’t slumped as bad as past recession-driven crashes or bear markets, I’d argue that much of the downside may already be baked in.

Further, I think many discount the odds of cooler inflation come the year-end CPI reports. Indeed, it’s all about inflation these days. Everything will nosedive or rocket higher on how much cooler or hotter inflation is versus the current estimates.

With a recession on the horizon, the dividends and distributions may be swollen, but seemingly less safe. That’s why I’d pay careful attention to the firms that boast alarmingly high dividend payouts.

In this piece, we’ll consider shares of Enbridge (TSX:ENB)(NYSE:ENB) and National Bank of Canada (TSX:NA). These two steady dividend studs seem more than capable of holding their own in what could be a choppy 2023.


Enbridge’s dividend is closing in on the 7% (currently at 6.7%) mark after the recent tumble and this year’s generous dividend increase. Though passive-income investors are right to be skeptical about such a hefty yield (which compares with the current rate of inflation), I’d argue that the track record of dividend stability is a thing to be enviable. Not only is the payout safe (even as the payout ratio stretches further), but Enbridge is likely to continue to pace of its dividend increases in a recession year.

Indeed, Enbridge has been through good times and bad over the past decade. Down around 15% from its peak, shares of ENB are retreating in sympathy with the broader energy patch on lower oil prices. Despite the correction, I think shares are way too cheap, even if oil prices were to continue toward the US$50-70 level.

At the end of the day, Enbridge’s managers are all about keeping income investors happy. If that means selling off non-core assets through the worst of times to do so, so be it.

National Bank of Canada

National Bank of Canada is a number-six Canadian bank that doesn’t get the respect it deserves. The stock is down 18% from its all-time high of around $105 per share to $85 and change. All the while, the dividend yield has swollen to 4.3%.

While the dividend is hardly the most attractive in the banking scene (it’s actually quite average), it’s worth noting that National Bank seems like a disruptive underdog in the Big Six. The bank is applying pressure on trading fees, and through innovative technologies, I’d look for National Bank to begin going after retail customers of its bigger brothers in time.

For now, loan losses are coming, and the 8.8 times trailing price-to-earnings multiple seems to reflect the damage to come. I’d argue there’s too much pessimism baked in, given the safety and sustainability of the growing dividend.

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 recommends Enbridge. The Motley Fool has a disclosure policy.

More on Investing

sale discount best price

Buy the Dip: 2 Strong TSX Stocks That Recently Went on Sale!

Consider buying Parkland Fuel (TSX:PKI) stock and another top dividend play on their recent corrections.

Read more »

A worker uses a double monitor computer screen in an office.
Dividend Stocks

TFSA Investors: 2 Winning Buy-and-Hold Forever Stocks in April 2024

Buy-and-hold stocks are easy enough to find if you limit yourself to dividends, but there are at least a few…

Read more »

worry concern
Dividend Stocks

Telus Stock Is Down to its Pandemic Low of Below $22: How Low Can it Go?

Telus stock is down 37% in two years and is trading near its pandemic low, making investors wonder how low…

Read more »

edit Businessman using calculator next to laptop
Energy Stocks

If You’d Invested $5,000 in Brookfield Renewable Partners Stock in 2023, This Is How Much You Would Have Today

Here's how a $5,000 lump-sum investment in BEP.UN would have worked out from 2023 to present.

Read more »

money cash dividends
Dividend Stocks

Portfolio Payday: 3 TSX Dividend Stocks That Pay Monthly

After adding these three TSX dividend stocks to your portfolio, you can expect to receive attractive monthly income for years…

Read more »

Dividend Stocks

The Top Canadian REITs to Buy in April 2024

REITs with modest amounts of debt, like Killam Apartment REIT (TSX:KMP.UN), can be good investments.

Read more »

edit Person using calculator next to charts and graphs
Stocks for Beginners

Where to Invest $7,000 in April 2024

Are you wondering how to deploy the $7,000 TFSA contribution increase in 2024? Here are four high-quality stocks for earning…

Read more »

Dividend Stocks

The Smartest Dividend Stocks to Buy With $500 Right Now

Some of the smartest buys investors can make with $500 today are stocks that have upside potential and pay you…

Read more »