The market correction is is giving pensioners and other Tax-Free Savings Account (TFSA) investors a chance to buy good TSX dividend stocks at discounted prices to hold in portfolios targeting reliable and growing passive income.
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Fortis
Fortis (TSX:FTS) is a Canadian utility company with $64 billion in assets located across Canada, the United States, and the Caribbean. The businesses include power-generation facilities, natural gas distribution utilities, and electric transmission networks.
Fortis stock has been on an upward trend for the past six months, but the share price still hasn’t regained all the losses it incurred from late May to mid-October last year. At the time of writing, Fortis trades near $59.50 per share compared to $65 last spring.
Income investors own Fortis for its steady dividend growth and the company’s clear guidance on planned dividend increases. Fortis raised the dividend in each of the past 49 years and intends to boost the payout by at least 4% per year through 2027.
This is a good example of a stock that is attractive for its dividend growth more than for its yield. At the time of writing, Fortis offers a dividend yield of 3.8%.
Fortis has a $22.3 billion capital program on the go to drive revenue and cash flow expansion. The company is also known for its successful track record of making strategic acquisitions to boost revenue growth.
Bank of Montreal
Bank of Montreal (TSX:BMO) is a contrarian pick today. The stock trades near $121 per share compared to the 12-month high around $148. Investors can take advantage of the dip to secure a 4.7% dividend yield and wait for future increases to increase the return.
Bank of Montreal recently closed its US$16.3 billion acquisition of Bank of the West, a U.S. regional bank with operations primarily located in California. The meltdown in U.S. bank stocks in March might be putting pressure on Bank of Montreal, as investors wonder if the company paid too much for Bank of the West.
The failure of another California-based bank this year triggered the rout in bank stocks and the market is still trying to figure out if more danger lurks in the banking sector. Ongoing volatility should be expected, but Bank of Montreal’s dividend should be safe, and the purchase of Bank of the West is expected to help drive revenue and profit growth in the coming years.
Despite the uncertainty in the banking sector and potential economic headwinds, the stock appears oversold.
The bottom line on top stocks to own for passive income
Fortis and Bank of Montreal are good examples of top TSX dividend stocks with distributions that should continue to grow. If you have some cash to put to work in a TFSA focused on passive income, these stocks deserve to be on your radar.
