Retirees and other investors searching for passive income can now buy great TSX stocks at discounted prices for a self-directed Tax-Free Savings Account (TFSA).
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Pembina Pipeline
Pembina Pipeline (TSX: PPL) trades near $40 at the time of writing compared to $52 in early June last year. The pullback is part of the broader decline in energy infrastructure stocks and is starting to look overdone.
Pembina Pipeline generated solid results for the first quarter (Q1) of 2023 with adjusted earnings before interest taxes depreciation and amortization (EBITDA) of $947 million compared to $1.01 billion in the same period last year. The drop was largely due to an outage on the Northern Pipeline system.
Pembina Pipeline provides midstream services to oil and natural gas producers primarily located in western Canada. The company has liquids and natural gas pipelines, gas gathering and processing facilities, logistics operations, and propane export terminals.
For 65 years the business has grown through a combination of internal projects and strategic acquisitions. Pembina pipeline currently has a market capitalization around $22 billion. This gives it the firepower to do deals, but the company is also at a size that would potentially make it a takeover target for a larger energy infrastructure player or even an alternative asset manager looking for a business with strong cash flow.
Management confirmed full-year guidance and the board just increased the dividend by 2.3%. Investors who buy the stock at the current level can get a 6.6% yield.
Bank of Nova Scotia
Bank of Nova Scotia (TSX: BNS) hired a new chief executive officer this year. The bank is undertaking a strategic review of the Canadian and international operations and could announce some big changes later this year or in early 2024.
Pundits are curious to see if all the Latin American businesses will remain core to the growth strategy. Bank of Nova Scotia’s foreign operations are primarily in Mexico, Peru, Chile, and Colombia. The four countries are members of the Pacific Alliance trade bloc that is home to a combined population of more than 230 million. Bank penetration is relatively low in these markets, so there is an opportunity for good growth as the middle class expands.
That being said, political and economic uncertainty is always a concern and BNS stock has unperformed its peers in recent years. Mexico will likely remain part of the mix, but the operations in the other three markets could potentially get sold off and the funds used to target new opportunities.
Until the bank lays out its plans, investors can take advantage of the weakness in the share price to pick up a 6.6% yield. The stock trades near $64 per share compared to above $81 in August last year. Bank of Nova Scotia just raised the quarterly dividend to $1.06 from $1.03. This suggests the board isn’t too worried about the revenue and earnings outlook, even with the anticipated economic headwinds.
The bottom line on top stocks to buy for passive income
Pembina Pipeline and Bank of Nova Scotia pay attractive dividends that should continue to grow. If you have some cash to put to work in a portfolio targeting passive income, these stocks deserve to be on your radar.
