Top Canadian dividend stocks are down from their 12-month highs. The market correction is driving up the yields retirees can get for their portfolios focused on passive income.
Dividend stock or GIC?
The drop in the share prices of leading TSX dividend-growth stocks is the result of rising interest rates. Higher borrowing costs can reduce cash available for distributions. At the same time, recession fears are making investors more conservative. Fixed-come investments, such as Guaranteed Investment Certificates (GICs), now offer rates above 5% and protect the principal investment.
Retirees who want zero risk in their portfolio should stick with GICs right now. Those who can handle some turbulence and want to get higher average yields on their savings can find attractive dividend deals today to boost their passive income.
Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS) raised its quarterly dividend from $1.03 to $1.06 per share when the bank announced fiscal second-quarter (Q2) 2023 earnings results. That’s a signal to investors that the board has confidence in the company’s ability to generate good revenue and profits over the medium term, even as the banks face some economic headwinds.
Bank of Nova Scotia trades near $65 per share at the time of writing. The stock was above $90 in early 2022.
Banks are boosting provisions for credit losses on expectations that higher interest rates will drive up defaults on commercial and residential loans. If interest rates continue to move up and stay elevated for too long, there is a risk the economy could go through a deep downturn.
Bank of Nova Scotia has a good capital cushion to ride out some tough times, and it is possible that the anticipated recession will be short and mild. In that scenario, BNS stock now looks oversold.
Investors who buy Bank of Nova Scotia stock at the current level can get a 6.5% dividend yield.
TC Energy
TC Energy (TSX:TRP) is a major energy infrastructure player in North America, with more than $100 billion in assets located in Canada, the United States, and Mexico. Natural gas pipelines and storage make up the largest part of the portfolio, along with oil pipelines and power-generation facilities.
Demand for North American natural gas is expected to grow in the coming years. TC Energy has the infrastructure in place or under construction to deliver natural gas from producers to liquified natural gas (LNG) export facilities.
TRP stock is down amid a broader pullback in the pipeline sector. Cost pressures on the Coastal GasLink pipeline project have added to the pain. Overall, however, the outlook should be positive for the company. TC Energy has a $34 billion capital program on the go that is expected to support annual dividend hikes of at least 3% over the medium term.
The board has increased the dividend annually for more than two decades. Investors can get a 7.25% yield at the current share price near $51.
The bottom line on top investments for passive income
Bank of Nova Scotia and TC Energy are good examples of top TSX dividend stocks with attractive yields and growing distributions. If you are looking for high-yield stocks to go along with your GIC investments for passive income, BNS and TRP deserve to be on your radar.
