The S&P/TSX Composite Index was up 55 points in mid-morning trading on Thursday, April 13. Canadian markets have been on a tear since late March, with the energy sector receiving a boost due to surging oil and gas prices. Despite that, Canadian investors might want to snatch up stocks that can generate consistent passive income in an uncertain environment. Today, I want to determine what top TSX stocks are better for the passive income they offer: Suncor (TSX: SU) or TD Bank (TSX: TD)? Let’s jump in.
Here’s why Suncor Energy stock also offers nice passive income
Suncor is a Calgary-based integrated energy company. This company specializes in the production of synthetic crude from Canada’s oil sands. Its shares have dipped marginally month over month as of late-morning trading on April 13. The stock is still up 5.8% in the year-to-date period.
This company released its final batch of fiscal 2022 earnings on February 14, 2023. In in the fourth quarter (Q4) of 2022, Suncor reported production of 688,100 barrels per day (bbls/d) — up from 665,900 in Q4 2021. Meanwhile, adjusted funds from operations (AFFO) rose to $4.18 billion, or $3.11 per common share, compared to $3.14 billion, or $2.17 per common share, for the prior year.
In Q4, Suncor announced that it would retain and continue to optimize its Petro-Canada retail business. That should help Suncor maintain strong cash flow, as gas prices remain high in this inflationary environment. Moreover, that should help bolster its income offerings.
Suncor currently offers a quarterly dividend of $0.52 per share. That represents a very solid 4.7% yield. Suncor has offered consistent passive income for the long haul, but it was forced to halve its dividend when the COVID-19 pandemic hit. Shares of this energy stock possess a very favourable price-to-earnings (P/E) ratio of 6.7.
Don’t sleep on the passive income that TD Bank can offer going forward
TD Bank is the second-largest financial institution in Canada, behind Royal Bank. Shares of this bank stock have remained largely flat month over month as of early afternoon trading on April 13. The stock is down 7.6% in the year-to-date period.
This bank released its Q1 2023 earnings on March 2, 2023. TD Bank delivered adjusted net income of $4.15 billion, or $2.23 per diluted share — up from $3.83 billion, or $2.08 per diluted share, in the first quarter of fiscal 2022. The bank has continued to draw on the strength of its large United States retail banking footprint. U.S. Retail net income rose to a record $1.58 billion — up 25% compared to the previous year.
Shares of this bank stock last had an attractive P/E ratio of 9.8. TD Bank currently offers a quarterly distribution of $0.96 per share, which represents a 4.7% yield. This bank stock has delivered passive-income growth for 12 consecutive years. That means that TD Bank qualifies as a Dividend Aristocrat on the TSX.
Which is the better buy right now?
This is a close call right now, especially on the passive-income front, but I’m more inclined to snatch up Suncor, as oil prices have gained significant momentum after OPEC production cuts. Moreover, the top energy stock also offers more attractive value at the time of this writing.
