Top TSX dividend stocks are starting to move off their recent lows, but Canadian retirees seeking high-yield passive income can still buy great dividend stocks trading at undervalued prices.
TC Energy
TC Energy (TSX:TRP) trades for close to $56 per share at the time of writing. That’s up from $51 last month but still way off the $74 level the stock hit last June.
The slide that occurred through most of the past year is partly due to a broad pullback in the energy infrastructure sector, but TC Energy is down more than its peers. A troubled pipeline project is at the heart of the investor angst. TC Energy’s Coastal GasLink pipeline is now expected to cost at least $14.5 billion to complete — more than double the initial estimate. Pandemic delays, bad weather, rising supply costs, labour shortages, and disputes with contractors have all impacted the development.
The good news is that the pipeline is more than 80% complete, and most of the surprises should be out at this point.
TC Energy’s total capital program through 2028 sits around $34 billion. As a result, management still expects revenue and cash flow to grow enough in the coming years to support targeted annual dividend increases of at least 3% over the medium term. This is good news for dividend investors seeking reliable and growing passive income.
Investors who buy TRP stock at the current level can get a 6.6% dividend yield.
CIBC
CIBC (TSX:CM) is a bit of a contrarian pick right now with all the uncertainty that surrounds how the sharp increase in interest rates in Canada and the United States will ultimately hit the economy and the banks.
CIBC has a large exposure to the Canadian residential housing market based on its size. Investors are concerned that a wave of defaults could be on the way if interest rates remain high for the next two or three years. In the event there is a meltdown in house prices due to panic selling or a surge in bankruptcies, CIBC could get stuck trying to unload properties at prices that are below the amount owed on the mortgages.
This is a risk to consider when evaluating the stock, but the likely outcome is a soft landing for the economy. It is even possible that Canadian house prices have already bottomed out, supported by a strong labour market and record immigration levels. Based on current economic expectations from the Bank of Canada, CIBC stock is probably oversold today.
The dividend should be safe, even if a deep recession occurs. Investors who buy CIBC at the current level can get a 5.9% yield. The stock trades for less than $58 compared to more than $70 at this time last year.
The bottom line on top TSX stocks for passive income
Ongoing volatility should be expected in the coming months and more downside could be on the way. However, TC Energy and CIBC pay attractive dividends that should continue to grow. If you have some cash to put to work in a portfolio targeting passive income, these stocks look cheap and deserve to be on your radar.
