A market correction is tough to watch, but it also gives dividend investors a chance to buy top Canadian dividend stocks at discounted prices for self-directed portfolios targeting passive income and total returns.
BCE
BCE (TSX:BCE) raised its dividend by at least 5% in each of the past 15 years. This is the kind of dividend-growth investors should look for when picking new stocks for an income portfolio, especially during times of economic uncertainty.
The company is projecting revenue growth and free cash flow growth in 2023. This should support another decent dividend increase for next year. BCE has the power to raise prices when it needs extra cash and continues to invest in network upgrades to protect its competitive position and drive revenue expansion.
That being said, BCE isn’t immune to a recession or the current era of high inflation. The media group tends to see advertising revenue decline when customers need to trim marketing budgets. Sales of new mobile phones might also slip as people decide to hold older models for longer in an effort to save some money. Rising interest rates designed to cool off the economy are making borrowing more expensive. This is also putting a pinch on BCE’s excess cash flow as debt expenses rise on funds borrowed to pay for capital projects.
Overall, however, BCE should still be a solid stock to own through a downturn in the economy. The share price sits near $61 at the time of writing. That’s off the 2022 peak around $74.
The pullback is probably overdone given the strong revenue stream from the core mobile and internet subscription services. Investors can now get a 6.3% dividend yield.
Enbridge
Enbridge (TSX:ENB) is another industry leader with a long history of dividend increases. In fact, Enbridge has increased the distribution for 28 consecutive years.
The company is a giant in the energy infrastructure sector with a market capitalization above $100 billion. Its pipeline networks are crucial to the smooth operation of both the Canadian and U.S. economies as Enbridge moves nearly a third of the oil produced in the two countries and transports roughly 20% of the natural gas used in the United States. The company also has natural gas utilities that deliver fuel to millions of commercial and residential customers and owns an oil export terminal that sends domestic oil to foreign buyers. In addition, Enbridge is expanding its renewable energy business in North America and Europe.
ENB stock trades for close to $50 per share at the time of writing compared to more than $59 in June last year. Management expects adjusted earnings per share and distributable cash flow to increase 4% and 3%, respectively, per year through 2025, supported by the current $17 billion capital program. Acquisitions could boost the outlook. Given the steady projections for the financials the drop in the share price should be a good opportunity to buy Enbridge stock. Investors can now get a 7% dividend yield.
The bottom line on top TSX dividend stocks
BCE and Enbridge pay attractive dividends that should continue to grow. If you have some cash to put to work in a portfolio focused on dividends, these stocks deserve to be on your radar.
