Retirees and other investors seeking reliable passive income are searching for top TSX dividend stocks with high yields that might be undervalued today and good to buy for a self-directed Tax-Free Savings Account (TFSA).
Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS) is Canada’s fourth-largest bank with a current market capitalization of about $82 billion.
The stock trades near $69 per share at the time of writing compared to $85 last April. The pullback through the end of last year was largely driven by growing fears that the Bank of Canada’s interest rate hikes that are designed to cool off the economy and reduce inflation will be too aggressive and could drive the economy into a deeper recession than anticipated.
Persistent high prices and the added burden of soaring debt costs could force households to quit spending on non-essential goods and services. If businesses are forced to start cutting staff in large numbers across all sectors, the jump in unemployment could potentially trigger a wave of mortgage defaults. This would be bad news for the Canadian banks due to their large residential mortgage portfolios.
At this point, the risk of a meltdown in the property market appears slim. Banks are working with struggling borrowers to get them through the current period of elevated rates and high immigration numbers will continue to support demand for homes and condos.
As such, fears about potential trouble at Bank of Nova Scotia and its peers might be overblown.
Investors who buy the stock at the current level can get a 6% dividend yield.
Enbridge
Enbridge (TSX:ENB) has a capital program of $18 billion on the go that should support revenue growth in the next few years. The energy infrastructure giant also has the balance sheet strength to make strategic acquisitions to drive earnings growth.
Enbridge’s share price is down to about $53.50 from the 12-month high around $59.50. The dip looks exaggerated given the reliability of the revenue stream and anticipated demand growth for oil and natural gas in the coming years.
Enbridge transports nearly a third of the oil produced in Canada and the United States and moves 20% of the natural gas used in America. Recent investments in oil and natural gas export terminals will position Enbridge to capitalize on rising demand for North American energy products.
At the same time, the company is expanding its renewable energy group. Enbridge completed a major offshore wind project in France in recent months with its partners and just received the approval to build an even larger project for the European country. At home, Enbridge purchased an American renewable energy developer last year to boost its North American assets.
The board raised the dividend in each of the past 28 years. Investors who buy Enbridge stock at the current level can get a 6.6% dividend yield.
The bottom line on top stocks for dividends
Bank of Nova Scotia and Enbridge pay attractive dividends that should continue to grow. If you have some cash to put to work in a TFSA focused on dividends, these stocks appear cheap today and deserve to be on your radar.
