TFSA Wealth: 2 Overlooked Dividend-Growth Stocks

These top TSX dividend stocks offer great dividend yields.

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Retirees seeking passive income and younger investors focused more on total returns can take advantage of the market correction to buy top TSX dividend stocks at undervalued prices right now for their self-directed Tax-Free Savings Account (TFSA) portfolios.

Canadian Natural Resources

Canadian Natural Resources (TSX:CNQ) is Canada’s largest energy producer with a current market capitalization of close to $80 billion. The company has a diversified asset base that covers the full spectrum of oil and natural gas products.

CNRL takes advantage of its strong balance sheet when oil and gas prices plunge to buy strategic assets at discounted prices. The company also tends to own its Canadian assets 100% as opposed to having partners on large projects. The strategy carries more risk, but it also gives management the freedom to shift capital around quickly to benefit from positive shifts in commodity prices.

Investors generally view CNRL as an oil producer, but the natural gas side of the businesses is huge. Natural gas prices often remain elevated when oil prices dip. This helps stabilize the revenue stream.

CNRL has given investors a dividend increase for 23 consecutive years. That’s an impressive track record for a company that had to ride out a number of commodity crashes over the past two decades. In addition, the compound annual dividend-growth rate over that timeframe is better than 20%. This makes CNRL one of the top dividend-growth stocks in the TSX in recent decades.

CNQ stock currently trades below $72 per share compared to the 2022 high around $88. Investors who buy the dip can get a 5% dividend yield.

Management gave investors a bonus dividend of $1.50 per share last August. The company continues to use excess free cash flow to reduce debt and buy back stock. As net debt falls, the board intends to return even more cash to shareholders.

The stock can be volatile, so you have to be comfortable riding out the moves in commodity prices. However, energy bulls might want to add CNRL to their portfolios on the latest dip.

BCE

BCE (TSX:BCE) raised its dividend by at least 5% in each of the past 15 years. Investors will likely see the trend continue, even as the economy heads for some potential turbulence in the next 12-18 months.

Why?

BCE generates core revenue from mobile and internet service subscriptions. These are necessary for businesses and households, regardless of the state of the economy. Even the TV subscriptions should hold up well as they are often bundled with the phone and internet services and people will likely cut other discretionary expenses before giving up their home entertainment.

BCE expects earnings to dip this year due to higher borrowing costs and reduced revenue in the media group. Overall revenue, however, is expected to increase compared to 2022, as is free cash flow.

BCE trades near $59 per share at the time of writing. The stock was above $73 in April last year. Investors can now get a 6.5% yield from the stock.

The bottom line on top stocks for passive income

CNRL and BCE pay attractive dividends that should continue to grow. If you have some cash to put to work, these stocks look oversold today and 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 Canadian Natural Resources. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker owns shares of BCE.

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