Retirees and other investors seeking steady and growing passive income can take advantage of the market correction to buy top Canadian dividend stocks at attractive prices right now for their self-directed Tax-Free Savings Account (TFSA) portfolios.
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Canadian Natural Resources
Oil and natural gas producers are not generally viewed as reliable dividend picks due to their reliance on commodity prices for revenue and profits. Canadian Natural Resources (TSX:CNQ), however, has proven to be an exception over the past two decades. In fact, the board has increased the dividend for 23 consecutive years with a compound annual growth rate of better than 20% over that timeframe.
CNRL is able to ride out the volatility in energy markets as a result of its diversified portfolio of oil and gas production. The company owns oil sands, conventional heavy oil, conventional light oil, offshore oil, natural gas, and natural gas liquids operations. In addition, CNRL tends to be the sole owner of its assets. This raises operational risk, but also gives management the flexibility to move capital around the portfolio to take advantage of changes in the energy market. That is harder to do when you have partners on projects.
CNQ stock currently trade near $75 per share compared to a 12-month high around $88.
At the current price, investors can get a dividend yield of 4.8% and look forward to future increases or bonus distributions. CNRL pays a quarterly base dividend of $0.90 per share right now. Last August, investors received a bonus $1.50 per share.
Enbridge
Enbridge (TSX:ENB) trades for close to $50 at the time of writing compared to more than $59 last June. The dip appears overdone considering the solid earnings performance over the past 12 months, and the current guidance for 3- 5% in annual earnings growth over the medium term.
Near-term volatility is expected as a result of threats to temporarily shut down the company’s Line 5 pipeline, but investors who buy the stock at the current level can pick up a 7.1% dividend yield.
The board increased the distribution in each of the past 28 years and more dividend hikes should be on the way supported by the $17 billion capital program and any strategic acquisitions that might occur.
Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS) trades for close to $67 per share compared to the 12-month high around $86.
Most bank stocks have been under pressure over the past year due to rising recession concerns and fears that soaring interest rates will trigger a wave of commercial and residential loan defaults.
A surge in unemployment caused by a deep recession would put pressure on the banks and share prices could definitely move lower in the near term. However, Bank of Nova Scotia is very profitable and already appears cheap trading around 9.3 times trailing 12-month earnings. The bank has adequate capital that should enable it to ride out any additional turbulence in financial markets.
The new chief executive officer is expected to overhaul the bank to drive more efficiency into the operations and improve shareholder returns. At the time of writing, investors can get a decent 6.1% dividend yield and wait for the new strategy announcements that are expected later in the year.
The bottom line on top TSX stocks for TFSA passive income
CNRL, Enbridge, and Bank of Nova Scotia all pay attractive dividends that should continue to grow. If you have some cash to put to work in a self-directed TFSA focused on passive income, these stocks deserve to be on your radar.
