Retirees seeking passive income and younger investors who use the Tax-Free Savings Account (TFSA) to build a self-directed pension fund are wondering which unloved TSX dividend stocks are good to buy today. TD Bank (TSX:TD) and BCE (TSX:BCE) trade below their 12-months highs and are widely viewed as solid buy-and-hold picks.
TD Bank
TD trades for close to $81 per share at the time of writing compared to nearly $95 at this time last year.
The pullback in bank stocks through the past 12 months has been a bit of a roller-coaster ride. A steep plunge in June and early July last summer came, as investors realized the central banks were going to have to get more aggressive to tame soaring inflation. Bargain hunters pushed up the share price of TD until the middle of February, but the surprise collapse of two U.S. banks and another in Europe sent the bank sector and TD stock into another plunge.
TD is down from $93 in February due to concerns about its American operations. The bank has a significant presence in the United States with branches running from Maine down the east coast to Florida. Last year, TD agreed to buy First Horizon for US$25 per share or roughly US$13.4 billion. The deal would add more than 400 branches in the southeastern part of the country and vault TD into a top-six position in the American bank sector.
First Horizon’s share price, however, dropped as low as US$15 in March and currently trades near US$18, so it is significantly below the price TD initially agreed to pay. Investors are wondering if the deal will be completed.
Ongoing turbulence should be expected in the bank sector, but TD now appears oversold. A quick look at TD’s long-term chart suggests that buying TD stock when it plunges tends to be a rewarding move over time.
Investors who pick up the stock today can get a 4.7% yield.
BCE
BCE raised its dividend by at least 5% in each of the past 15 years. The company gets the bulk of its revenue from essential mobile and wireless services, so cash flow should hold up well during a recession.
That being said, BCE is seeing some pressure on ad sales in its media group and consumers might keep older phones for longer, as they look for ways to save money amid a wave high inflation, so BCE will still feel the pinch in some part of its business.
High interest rates are expected to drive up borrowing costs this year, and BCE says it anticipates a dip in adjusted earnings in 2023 compared to 2022. Revenue and free cash flow should still grow, however, so investors will probably see the dividend-growth trend continue in 2024.
BCE trades for close to $64 at the time of writing. That’s up from $59 in March but still down from the 12-month high around $74.
Investors who buy BCE stock at the current level can get a 6% dividend yield.
Is one a better pick today?
TD and BCE are top TSX dividend stocks paying attractive dividends that should continue to grow. TFSA investors searching for high-yield passive income might decide to make BCE the first pick right now. Those who have some tolerance for volatility should consider going with TD as pick for total returns.
I would probably split a new investment between the two stocks today.
