The latest market correction is giving investors a chance to buy top TSX dividend stocks at discounted prices for a self-directed Tax-Free Savings Account (TFSA) portfolio focused on passive income and total returns.
Enbridge
Enbridge (TSX:ENB) trades for close to $51.50 at the time of writing compare to more than $59 at the 12-month high last June when oil prices soared to US$120 per barrel.
The stock has tracked the energy producers lower amid the pullback in oil and natural gas prices, but Enbridge generally isn’t impacted in a material way by changes in the price of the commodities. Revenue primarily comes from providing transmission, storage, and distribution services of the fuels. As long as the pipelines are full, it doesn’t really matter what is happening in the commodity market.
Enbridge moves about 30% of the oil produced in Canada and the United States. Its natural gas distribution businesses supply millions of Canadian homes and businesses with the essential fuel. Enbridge owns an oil export terminal in the United States and is a partner on a new liquified natural gas (LNG) facility being built in British Columbia. International demand for North American oil and natural gas is expected to rise in the coming years due to the reliability of the supplies.
The company is also expanding its renewable energy portfolio.
Enbridge’s current $18 billion capital program should drive revenue and cash flow growth to support the dividend. The board raised the payout in each of the past 28 years. At the current share price, investors can get a 6.9% dividend yield.
Telus
Telus (TSX:T) trades for less than $27 per share right now compared to more than $34 last April. The pullback appears overdone when you consider the essential nature of the services Telus provides to Canadian residential and commercial clients. The bulk of the revenue stream comes from internet and mobile subscriptions. These services are required in good and bad economic times, so Telus should be a good stock to own if you are looking for businesses with cash flow that is recession resistant.
Even the TV and streaming subscriptions should hold up well. Most people will cut other discretionary spending before they axe the sports channel and other sources of entertainment. That being said, Telus isn’t immune to an economic downturn. The sale of new phones, for example, would likely slow, as people keep older models for longer to preserve cash.
Telus expects its capital expenditures to drop by roughly $1 billion in 2023 after largely completing its copper-to-fibre transition. This should free up more cash for distributions. Telus has increased its dividend annually for more than two decades and investors should see steady payout hikes continue.
At the time of writing, the stock provides a 5.25% dividend yield.
The bottom line on top stocks to buy for passive income and total returns
Enbridge and Telus pay attractive dividends that should continue to grow. If you have some cash to put to work in a TFSA focused on passive income and total returns, these stocks look cheap right now and deserve to be on your radar.
