The S&P/TSX Composite Index has moved up again after its March 2023 market downturn. However, the Canadian benchmark index remains volatile. Down by 3.5% from its 52-week high, the Canadian stock market still boasts several stocks potentially trading for lower-than-fair valuations.
Investors seeking undervalued stocks to buy for their self-directed Tax-Free Savings Account (TFSA) portfolios might have an excellent opportunity on their hands. If you can identify and invest in the right high-quality but discounted stocks, there is a lot of tax-free wealth growth to be had.
Value-seeking investors who also want to enjoy a passive income through their TFSA portfolios can consider investing in top-notch dividend stocks when they are down. When share prices are lower, dividend yields become inflated.
The TSX boasts several high-quality dividend stocks offering high-yielding dividends. Today, we will look at two top dividend stocks you can consider investing in right now to lock in higher-yielding payouts.
BCE
As of this writing, BCE Inc. (TSX:BCE) stock trades for $63.20 per share, boasting a juicy 6.12% dividend yield. Down by almost 9% from its 52-week high in 2022, BCE stock’s share price declined as key interest rates rose.
The Bank of Canada (BoC) is raising interest rates to keep inflation down. While it might eventually help the economy, higher interest rates have driven up borrowing costs for companies like Canada’s largest telecom operator.
The $57.3 billion market capitalization stock relies heavily on taking on debt to fund its major capital programs. BCE stock spent around $5 billion in 2022 alone on expansion projects. Deteriorating economic conditions may also lead to a downturn in new phone sales. As consumers keep discretionary expenses down to wade through inflation, lower spending could impact BCE’s short-term financial performance.
That said, the essential nature of BCE’s core internet and mobile subscription services can keep the cash flows coming in, even during a recession. As a major player in the telecom sector, BCE stock is not going anywhere. The Canadian Dividend Aristocrat can be a good addition to your TFSA portfolio as an undervalued stock.
TC Energy
TC Energy (TSX:TRP) is another significant player but in another industry entirely. Boasting a 93,000 km long natural gas pipeline, it also boasts 650 million cubic feet of natural gas storage facilities in its portfolio. TC Energy’s portfolio spans Canada, the US, and Mexico, making it a significant energy infrastructure company in North America.
TC Energy also boasts several power-generation facilities and oil pipelines that diversify its revenue stream. Its performance in 2022 was strong, bringing in $4.3 billion in adjusted earnings for fiscal 2022, up by around 3.38% from its adjusted earnings in the same period in fiscal 2021. That said, TRP stock is down by a substantial margin from its 52-week high.
As of this writing, TC Energy stock trades for $54.40 per share, down by almost 27% in the last 12 months. The pullback in the energy sector in the second half of 2022 impacted TC Energy stock as well. However, it pulled back more than its peers due to issues with its Coastal GasLink project.
The project was slated to cost TC Energy around $7 billion. However, bad weather, issues with contractors, and pandemic-induced delays have driven the costs up to $14.5 billion. That said, the project is nearing completion and can bolster TRP stock’s finances for years to come. At current levels, TRP stock boasts a juicy 6.84% dividend yield that makes it too attractively priced right now to ignore.
Foolish takeaway
BCE and TC Energy stock are top dividend-paying companies boasting juicy dividend yields. If you have capital to put to work in the stock market, these two stocks appear too cheap to ignore right now. To enjoy tax-free wealth growth through dividend income and capital gains, BCE stock and TC Energy stock can be great additions to your TFSA portfolio.
