The latest leg of the 2022 market correction is giving investors focused on passive income an opportunity to buy some top TSX dividend stocks at cheap prices for their Tax-Free Savings Account (TFSA) heading into 2023.
TFSA limit 2023
The TFSA limit for 2023 will be $6,500. This raises the maximum cumulative contribution space to as high as $88,000 per person. That’s a tidy sum that can be used by retirees to hold quality dividend stocks that will generate reliable tax-free income in addition to their regular earnings from company and government pensions.
Enbridge (TSX:ENB) is a giant in the North American energy infrastructure industry. The company has a current market capitalization of nearly $105 billion and transports almost a third of the oil produced in Canada and the United States.
Revenue growth is unlikely to come from massive new pipeline projects, as it did over the past few decades, but Enbridge is still finding opportunities for tuck-in projects across the existing oil and natural gas asset base. The company is also shifting acquisition and investment activity to new segments. Enbridge spent US$3 billion to buy an oil export terminal in Texas last year. On the natural gas side, Enbridge recently secured a 30% interest in the Woodfibre LNG facility being constructed in British Columbia.
Renewable energy is a growing part of the business. Enbridge is expanding its wind and solar operations in both North American and Europe. The company is also getting into hydrogen production and carbon sequestration.
Enbridge stock trades for less than $52 per share at the time of writing compared to more than $59 in June. The drop appears overdone given the solid 2022 results and the recent 3.2% dividend hike. Investors who buy the stock at the current share price can pick up a 6.9% dividend yield.
CIBC (TSX:CM) trades for close to $54.50 at the time of writing compared to more than $83 at the peak earlier this year. The meltdown in the share price has occurred, as investors increasingly worry about the impacts of rising interest rates on households and businesses in the coming year.
CIBC has a large residential mortgage portfolio relative to its size. This means a crash in the Canadian housing market would likely hit CIBC harder than its peers. For the moment, the decline in house prices has occurred in a controlled way and the market has not shown signs of panic selling. As long as the jobs market remains healthy, there shouldn’t be a sharp jump in mortgage defaults.
At the current multiple of 8.1 times trailing 12-month earnings CIBC stocks appears cheap, even when the economic headwinds are taken into consideration. The board raised the dividend twice in 2022, and management expects earnings to grow next year.
Investors can now get a 6.25% dividend yield.
The bottom line on top stocks to buy for passive income
Enbridge and CIBC pay attractive dividends that should continue to grow. If you have some cash to put to work in a TFSA focused on passive income, these stocks look cheap today and deserve to be on your radar.