Income-seeking investors can consider buying shares of quality companies trading at a discount that currently offer you attractive dividend yields. This strategy will help shareholders benefit from regular dividend payouts as well as capital gains over time.
The stock market volatility in the last 18 months has dragged valuations of companies across sectors significantly lower, raising forward yields in the process. Here are three top TSX stocks that offer you a dividend yield of at least 6% in May 2023.
Bank of Nova Scotia stock
Valued at a market cap of $78 billion, Bank of Nova Scotia (TSX:BNS) is among the largest banks in Canada. Down 30% from all-time highs, BNS stock currently pays you a tasty dividend yield of 6.1%.
Despite a challenging macro-environment, BNS increased its net interest income by 5% year over year in the fiscal first quarter (Q1) of 2023 (ended in January) due to strong asset growth across business segments. However, lower wealth management revenues, underwriting, and advisory fees dragged non-interest income lower by 8% in the quarter.
Moreover, internal capital generation driven by organic growth allowed the banking giant to improve its common equity tier-one (CET1) ratio by an additional five basis points. A higher CET1 ratio is beneficial for banks, as it enables them to withstand economic shocks better.
While BNS is part of a cyclical sector, it has increased dividends by 9% annually in the last 20 years, showcasing the resiliency of its business model. After adjusting for dividends, BNS stock has returned 435% to shareholders since May 2003.
Priced at 8.6 times forward earnings, BNS stock is also trading at a discount of 11% to consensus price target estimates.
TC Energy stock
An energy infrastructure company, TC Energy (TSX:TRP) stock currently yields 6.6%. TC Energy is a well-diversified company and operates a network of 93,700 kilometres of natural gas pipelines, transporting the commodity from supply basins to distribution companies, industrial facilities, liquified natural gas export terminals, and power generation plants.
It operates regulated natural gas storage facilities and a liquids pipeline system that spans 4,900 kilometres. Additionally, TC Energy has interests in seven power-generation facilities with a combined capacity of 4,300 megawatts.
In Q1 of 2023, TC Energy reported comparable EBITDA (earnings before interest, tax, depreciation, and amortization) of $2.8 billion — an increase of 16% year over year. The TSX energy heavyweight continues to report robust earnings as a majority of its cash flows are regulated and backed by inflation-adjusted long-term contracts.
In the last 20 years, TC Energy stock has returned close to 500% to shareholders after adjusting for dividends.
The final TSX dividend stock on my list is BCE (TSX:BCE), a Canadian telecom behemoth. Part of a recession-resistant sector, BCE has returned 455% to shareholders since May 2003. Due to stable and predictable cash flows, BCE stock has increased dividends by 5% annually since 2011.
BCE invested $1.1 billion in capital expenditures in Q1 to expand its broadband network, which should drive future cash flows higher. The company confirmed it remains on track to widen its fibre footprint by 650,000 locations covering 85% of Canada’s population with its 5G service by the end of 2023.