Income Investors: 2 Cheap Dividend Stocks With 5% Yields

These top TSX dividend stocks still look undervalued.

| More on:
value for money

Image source: Getty Images

Retirees and other dividend investors are searching for reliable dividend-growth stocks to add to their retirement portfolios focused on generating passive income or total returns. With a recession likely on the way in the next 12-18 months, it makes sense to seek out top TSX dividend stocks that should continue to raise their payouts through an economic downturn.

TC Energy

TC Energy (TSX:TRP) trades for close to $65.50 per share at the time of writing compared to more than $74 in June. The dip in the share prices gives investors a chance to pick up a 5.5% dividend yield with dividend growth of 3-5% per year likely on the way over the medium term.

TC Energy is working through a $34 billion capital program of secured projects that should help drive revenue and cash flow growth to support dividend increases. The company is building a large natural gas pipeline in Canada that will connect natural gas producers to a new liquified natural gas (LNG) export terminal on the B.C. coast.

In the United States, TC Energy has an extensive network of natural gas infrastructure that includes assets connecting gas producers in the key Marcellus and Utica shale plays to LNG facilities on the Gulf Coast. International demand for Canadian and U.S. natural gas is expected to grow in the coming years, and TC Energy is positioned well to benefit from the trend.

BCE

BCE (TSX:BCE) trades for less than $64 per share at the time of writing and offers investors a 5.75% dividend yield.

This should be a good stock to buy if you are concerned the Canadian economy could be headed for a recession in 2023 or 2024. The company provides mobile and internet services that households and businesses need, regardless of the state of the economy. Even the TV subscription revenue should hold up well, as most people will cut out other discretionary spending before abandoning their sports and entertainment channels.

BCE’s media business would be a possible weak link in the revenue stream during a downturn, as occurred during the pandemic. Advertisers could reduce spending on TV, radio, and digital promotions if times get really tough. That being said, the media division delivered solid results for the third quarter (Q3) of 2022, despite the economic headwinds. Operating revenue was in line with the same period last year. Digital revenues jumped 40%, helping offset weaker TV and radio ad sales.

BCE confirmed its 2022 guidance when it reported the Q3 results. Free cash flow growth is targeted at 2-10% for the year compared to a drop of 11% in 2021. The strong performance should support a dividend increase in the 5% range, keeping with the trend over the past 14 years.

The bottom line on top dividend stocks to buy now

No dividend is 100% safe, but TC Energy and BCE have good track records of dividend growth and pay attractive distributions that should continue to increase in the coming years, even if the economy hits a rough patch. If you have some cash to put to work, these stocks deserve to be on your radar.

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. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker owns shares of BCE.

More on Dividend Stocks

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

3 Dividend Stocks Everyone Should Own for the Long Haul

For investors looking for top-tier dividend stocks to buy and hold for the long term, here are three of my…

Read more »

Payday ringed on a calendar
Dividend Stocks

3 Dividend Stocks That Pay Me More Than $54.57 Per Month

These three dividend stocks have done me well over the years, so let's look at how much I've gotten in…

Read more »

Golden crown on a red velvet background
Dividend Stocks

Dividend Royalty: 3 Fabulous Stocks to Buy Now for Decades of Passive Income

Rogers Communications stock and Canadian Natural Resources stock could pay you dividends for decades to come.

Read more »

Dividend Stocks

The Top Canadian REITs to Buy in April 2024

For growth and dividends this April, look to these two REITs that have quite the promising present as well as…

Read more »