TFSA Passive Income: 2 High-Yield Canadian Stocks With Great Dividend Growth

Top TSX dividend stocks now look cheap for TFSA investors seeking passive income.

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The market correction is giving retirees and other Tax-Free Savings Account (TFSA) investors a chance to buy top TSX dividend stocks at cheap prices for portfolios focused on passive income. When share prices fall the yields rise on the dividend payments, giving investors a chance to earn higher returns on their savings.

BCE

BCE (TSX:BCE) raised its dividend by at least 5% in each of the past 15 years. This steady dividend growth is one of the reasons BCE is a popular pick among investors seeking reliable and growing passive income.

BCE stock trades near $62.50 per share at the time of writing compared to $73 in April last year.

The pullback might be overdone considering the reliability of BCE’s core revenue stream and the company’s expectation for revenue and free cash flow growth this year.

BCE is a giant in the Canadian communications sector with wireless and wireline networks providing mobile, internet, TV, and security services to millions of residential and commercial customers across the country. These are largely essential services that people will keep using, even when economic times get tough.

BCE’s other operations are more at risk of a decline in revenue during a recession. The media group owns a television network, specialty channels, and radio stations that rely on advertising. As costs increase and sales slow down, businesses will reduce marketing budgets. BCE is already seeing an impact on the media group’s revenues.

High borrowing costs will put a dent in cash flow this year and BCE is anticipating a dip in adjusted earnings as a result, but the overall business looks solid and the dividend should be very safe.

At the time of writing, investors can get a 6.2% dividend yield.

Pembina Pipeline

Pembina Pipeline (TSX:PPL) just increased the dividend by 2.3%. Investors who buy the stock at the current price near $41.50 can get a 6.4% dividend yield.

The stock is down from $53 last June, so investors have a chance to buy Pembina Pipeline on a big pullback and set themselves up for some decent potential gains when the market recovers.

Pembina Pipeline has grown considerably over the past 65 years through strategic acquisitions and internal development projects. The company provides a wide range of services to oil and natural gas producers. Pembina Pipeline has pipeline infrastructure, gas gathering and gas processing facilities, logistics services, and a propane export business.

The first-quarter (Q1) 2023 results dipped due to an outage on the Northern Pipeline system, but Pembina Pipeline is still providing full-year adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) guidance of $3.5 billion to $3.8 billion. Adjusted EBITDA in 2022 was a record $3.75 billion.

Oil, natural gas, and gas liquids demand continues to rebound off the pandemic slump. Pembina Pipeline plays a key role in the midstream segment of the Canadian energy sector and should benefit as volumes increase.

It wouldn’t be a surprise to see Pembina Pipeline become a takeover target in the next few years, as the industry consolidates and alternative asset managers search for high-return opportunities.

The bottom line on top dividend stocks for TFSA investors

BCE and Pembina Pipeline pay attractive dividends that should continue to grow. If you have some cash to put to work in a TFSA focused on passive income, 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 Pembina Pipeline. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker owns shares of BCE.

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