Canadian stocks are moving higher after the March market correction. Investors seeking top TSX dividend stocks for passive income and total returns are wondering which names might still be undervalued and good to buy right now for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP).
BCE (TSX:BCE) trades near $64.50 at the time of writing. That’s up from the October low around $56 but still well off the 2022 high around $74.
The stock price slipped through the summer months and into the fall last year, as investors started to worry that the steep increases in interest rates by the Bank of Canada would trigger a recession and hurt BCE’s revenue stream. Higher rates also drive up borrowing costs for companies like BCE that use debt to fund a portion of their large capital programs. BCE spent roughly $5 billion last year on projects.
On the revenue side, it is true that BCE’s media business could see ad sales drop during a recession as customers reduce marketing budgets to ride out tough times. Sales of new phones could also slow down. Households are struggling with a combination of high inflation and higher mortgage costs.
BCE’s core internet and mobile subscription services, however, should hold up well in the event the economy slides into a recession. This is probably why the company expects revenue to increase in 2023 compared to last year. BCE also has the power to increase prices when it needs extra cash to cover rising expenses.
Investors who buy the stock at the current price can get a 6% yield. The board raised the dividend by at least 5% in each of the past 15 years.
TC Energy (TSX:TRP) is a major player in the North American energy infrastructure sector with 93,000 km of natural gas pipelines and roughly 650 million cubic feet of natural gas storage located across Canada, the United States, and Mexico.
The company also has oil pipelines and power-generation facilities that round out the revenue stream. TC Energy delivered decent results in 2022. Adjusted earnings for the year came in at $4.28 billion compared to $4.14 billion in 2021. However, the stock is down considerably from the 12-month high. TC Energy trades near $55 per share at the time of writing compared to $74 last June.
The broader energy infrastructure sector pulled back in the second half of 2022 along with oil and gas stocks. TC Energy fell more than some of its peers, however, due to troubles on its Coastal GasLink project. The company recently provided an update that puts the cost near $14.5 billion, which is more than double the original budget. Pandemic delays, bad weather, problems with contractors, and rising material prices are all to blame.
Fortunately, the project is nearly complete, and investors have a better view on the remaining cost risks. TC Energy has a combined portfolio of $34 billion in projects on the go that is expected to support ongoing annual dividend increases of at least 3%. The board raised the payout in each of the past 23 years. Investors who buy TRP stock at the current level can get a 6.8% dividend yield.
Fuel demand is expected to remain robust in the coming years, both in the domestic market and overseas. TC Energy’s infrastructure positions the company well to benefit.
The bottom line on top TSX dividend stocks
BCE and TC Energy 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 appear cheap today and deserve to be on your radar.