TFSA Wealth: 2 Oversold TSX Dividend Stocks to Own for Decades

These top TSX dividend stocks look cheap right now.

| More on:
data analyze research

Image source: Getty Images

Canadian savers can take advantage of the market correction to add top TSX dividend stocks to their Tax-Free Savings Accounts (TFSAs) targeting passive income and total returns. Buying great stocks on dips takes courage, but the higher dividend yield and potential upside torque on a rebound can make the contrarian move a profitable one over the long term.


CIBC (TSX:CM) is the smallest of the five largest Canadian banks with a current market capitalization near $51 billion. The stock trades for close to $56.50 at the time of writing compared to a 12-month high above $70 and more than $80 in early 2022.

Over the past year, most bank stocks have come under pressure amid rising recession fears caused by the sharp increase in interest rates in the United States and Canada. The U.S. Federal Reserve and the Bank of Canada are trying to bring inflation back down to around 2%. To do this, they need to cool off an overheated economy and bring the employment market into balance. Hiking borrowing costs for businesses and consumers is perceived as an effective way to meet this objective.

The risk is that the economy could go into a meaningful recession and unemployment could surge. Homeowners are already struggling with higher costs for essentials and the sharp jump in rates on their variable-rate loans is eating into savings. As fixed-rate mortgages come up for renewal, even more property owners will struggle to make ends meet. A wave of job cuts would make the situation worse.

CIBC has a large Canadian residential mortgage portfolio relative to its market capitalization. As such, a meltdown in the housing market caused by soaring defaults and panic selling would likely hit the bank harder than its larger peers.

That being said, CIBC has a strong capital position and remains very profitable. The Bank of Canada expects a soft landing to occur for the economy. Employment is holding up well, despite the jump in interest rates and record levels of immigration should support demand for homes and condos, even if the market softens. As long as the worst-case scenario doesn’t materialize, CIBC stock looks oversold.

Additional volatility should be expected in the near term, but CIBC’s dividend should be safe, and investors can now get a 6% dividend yield.


Telus (TSX:T) trades for close to $27.50 at the time of writing compared to more than $34 at the peak in 2022.

Recession fears have investors worried that revenue could take a hit in the medium term. In addition, the sharp jump in interest rates makes it more expensive to fund capital projects. This can put a dent in cash flow available for distributions.

Products sales could slow down as customers decide to hold old phones for longer, but the revenue coming from mobile, internet, and TV service subscriptions should be resilient during an economic downturn.

In fact, Telus expects operating revenue to grow by at least 11% this year. Adjusted earnings before interest, taxes, depreciation, and amortization will increase at least 9.5%, according to current guidance. Telus is also targeting $2 billion in free cash flow for 2023, so dividend investors should see decent dividend growth in 2024.

Telus has increased the distribution annually for more than two decades. The board normally raises the payout by 7-10% every year. Investors who buy Telus stock at the current level can get a dividend yield of 5.3%.

The bottom line on top TFSA stocks

CIBC and Telus pay attractive dividends that should continue to grow. If you have some cash to put to work in a self-directed TFSA, these stocks deserve to be on your radar.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool recommends TELUS. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker owns shares of Telus.

More on Dividend Stocks

Target. Stand out from the crowd
Dividend Stocks

RRSP Pension: 2 Dividend Stocks to Buy on the Latest Dip

These high-yield TSX stocks look cheap right now for RRSP investors.

Read more »

Retirees sip their morning coffee outside.
Dividend Stocks

Safe and Sound Stocks for Canadians: My Top 5 Choices

Five safe stocks to buy on a market pullback.

Read more »

5G chip
Dividend Stocks

8.86% Dividend Yield! I’m Buying This TSX Stock and Holding it for Decades

The TSX is a gold mine of lucrative dividend stocks trading near their multi-year low. An 8.86% dividend yield is…

Read more »

green power renewable energy
Dividend Stocks

Brookfield Infrastructure vs. Brookfield Renewable: Which Brookfield Stock is a Better Buy?

Both Brookfield Infrastructure (TSX:BIPC) and Brookfield Renewable (TSX:BEPC) are dividend income earners trading at a discount, but which stock is…

Read more »

Hour glass and calendar concept for time slipping away for important appointment date, schedule and deadline
Dividend Stocks

Cash Kings: 3 TSX Stocks That Pay Monthly

These Canadian stocks reward their shareholders with regular monthly dividends and a high yield.

Read more »

Happy retirement

3 Stocks Retirees Should Absolutely Love

Retirees aiming for a solid mix of capital gains and dividend returns should consider these three stocks.

Read more »

Dollar symbol and Canadian flag on keyboard
Dividend Stocks

Passive Income: Top TSX Dividend Stocks to Buy for 7% and 8% Yields

These top TSX dividend stocks look undervalued and now offer high yields for investors seeking passive income.

Read more »

Paper Canadian currency of various denominations
Dividend Stocks

TFSA 101: Earn $500 Per Month Tax-Free

Here's how a covered-call ETF plus a TFSA can help you create a lucrative monthly passive-income stream.

Read more »