Passive-income investors who missed the rally after the 2020 crash can take advantage of the latest market correction to get high dividend yields from top Canadian dividend stocks.
Buying stocks on dips takes courage, and additional near-term downside is possible, but great TSX dividend-growth stocks usually recover over time to deliver attractive total returns.
Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS) recently raised the quarterly dividend from $1.03 to $1.06 per share. The board’s confidence in the bank’s ability to generate revenue and profits to support the increase should be a signal to investors that the pullback in the stock price over the past year might be exaggerated.
Bank of Nova Scotia reported a common equity tier-one (CET1) ratio of 12.3% as of the end of April. The regulatory arm of the government that is in charge of the banks looks at potential risks to the financial system and mandates a minimum capital level to protect against a potential financial crisis. The regulator will require Canadian banks to have a CET1 ratio of at least 11.5% by the end of this year compared to the current 11% level. Hence, Bank of Nova Scotia already has adequate capital to ride out some market turbulence.
BNS stock trades near $64 at the time of writing compared to more than $90 in early 2022.
Investors who buy Bank of Nova Scotia at the current level can pick up a 6.6% dividend yield.
TC Energy
TC Energy (TSX:TRP) trades for close to $52 per share compared to more than $70 in early June last year. A decline in the broader energy infrastructure sector occurred over the past year amid soaring interest rates. Pipeline companies use debt as part of their funding mix for capital programs. Rising borrowing expenses can eat into cash flow available for distributions to shareholders.
TC Energy is also dealing with a major project that is over budget. The final tally for the Coastal GasLink pipeline is expected to be at least $14.5 billion, which is more than double the initial target. Fortunately for investors, the development was 87% complete as of the first-quarter 2023 earnings statement.
Despite the challenges on the Coastal GasLink pipeline TC Energy still expects the overall $34 billion capital program to generate enough revenue and cash flow growth to support annual dividend increases of at least 3% over the medium term.
Investors who buy TRP stock on the latest pullback can get a 7.1% dividend yield.
The bottom line on top high-yield stocks for passive income
Bank of Nova Scotia and TC Energy offer high dividend yields and distributions 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.
