2 Top TSX Stocks for TFSA Investors to Buy Now

Top TSX dividend stocks are now on sale for investors seeking high-yield passive income.

| More on:
TFSA and coins

Image source: Getty Images

The market correction is providing investors with a good opportunity to buy discounted TSX dividend stocks for Tax-Free Savings Account (TFSA) portfolios focused on passive income and total returns.

TC Energy

TC Energy (TSX:TRP) is a major player in the North American energy infrastructure industry. The company is best known for its natural gas transmission assets with more than 93,000 km of natural gas pipelines running across Canada, the United States, and Mexico. TC Energy also has oil pipelines and power-generation facilities.

The current $34 billion capital program is expected to drive revenue growth and cash flow expansion in the next few years.

Despite the growth profile, the stock took a big hit over the past six months, largely due to ongoing challenges and surging costs on its Coastal GasLink pipeline. The project will eventually bring natural gas from producers in northeastern British Columbia to a new liquified natural gas (LNG) facility being built on the B.C. coast. At its annual investor day in November, TC Energy said the development is 80% complete, and the company will provide an updated cost forecast in early 2023.

The board still intends to raise the dividend by 3-5% annually through 2026.

At the time of writing, TC Energy stock trades for close to $57 per share. This is down from the 2022 high around $74. Investors who buy TRP stock at the current level can get a 6.3% dividend yield.

Bank of Nova Scotia

Bank of Nova Scotia (TSX:BNS) is down about 27% over the past 12 months. The decline through most of 2022 occurred, as investors became increasingly concerned about the threat of a recession 2023.

The Bank of Canada and the U.S. Federal Reserve raised interest rates aggressively last year and are expected to push rates even higher in the coming weeks in an ongoing effort to cool off an overheated economy and get inflation under control. The combination of higher living costs and soaring debt expenses has investors worried that thousands of businesses and households will not be able to make their loan payments once they burn through their pandemic savings.

In the event the central banks trigger a deep recession, unemployment could surge, and the bankruptcy claims could skyrocket. Canada’s housing market could potentially shift from a controlled downturn to a crash. In that scenario, Bank of Nova Scotia and its peers might see larger-than-expected loan losses.

Bank of Nova Scotia’s incoming chief executive officer recently said that 20,000 residential mortgage customers are considered vulnerable if conditions deteriorate. This would be about 2.5% of the mortgage portfolio, which is easily manageable.

How the situation will ultimately pan out is anyone’s guess. Economists broadly expect a recession to be short and mild. Even if it turns out to be worse than that, the drop in Bank of Nova Scotia’s share price appears overdone.

Investors can buy the stock for just 8.6 times trailing 12-month earnings right now and can pick up a 6% dividend yield.

The bottom line on top TSX stocks to buy for passive income

Additional downside is certainly possible, but contrarian investors seeking reliable passive income might want to consider adding TC Energy and Bank of Nova Scotia to their portfolios while these top TSX dividend stocks are out of favour.

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 recommends Bank Of Nova Scotia. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker has no position in any stock mentioned.

More on Dividend Stocks

Dividend Stocks

3 Canadian REITs That Pay Out Every Month

$10 can buy you a stake in a REIT that pays monthly distributions yielding 8.2% annually. CT REIT and another…

Read more »

A meter measures energy use.
Dividend Stocks

3 Reasons to Buy Utility Stocks in 2023

Here's why adding utility stocks to your portfolio is a smart idea, as we face significant uncertainty in 2023.

Read more »

Modern buildings in business district
Dividend Stocks

2 Top Residential REITs to Buy in February 2023

These two top residential REITs to buy offer attractive passive income as well as long-term growth potential.

Read more »

Simple life style relaxation with Asian working business woman healthy lifestyle take it easy resting in comfort hotel or home living room having free time with peace of mind and self health balance
Dividend Stocks

TFSA Investors: Make $102/Month Without Lifting a Finger

Here’s an amazing monthly Canadian dividend stock that can help TFSA investors earn reliable passive income for years.

Read more »

Dividend Stocks

TFSA Passive Income: Earn $129/Month Tax Free

Do you seek passive income? Leverage your TFSA to earn tax-free passive income via these Dividend Aristocrats.

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

How to Invest $23,000 in 2023 to Create Passive Income

Here's how income-generating cash cows such as Canadian Utilities and TC Energy can help you earn over $1,000 in annual…

Read more »

Early retirement handwritten in a note
Dividend Stocks

2 High-Dividend Stocks to Buy Today for Early Retirement

You can buy these two high-dividend Canadian stocks right now to help you plan an early retirement from work.

Read more »

worry concern
Dividend Stocks

Worried About Market Downturn? Buy This High-Yielding (6.3%) Dividend Stock

The stock market has been pretty volatile lately. It’s better to have a balanced portfolio that can perform in every…

Read more »