2 Great Dividend Stocks to Beat Inflation

Top TSX dividend stocks are on sale.

| More on:

Retirees and other investors seeking passive income are searching for ways to generate high yields on their savings to help offset the impact of inflation. One popular strategy involves owning top TSX dividend-growth stocks inside a self-directed Tax-Free Savings Account (TFSA).

The pullback in the share prices of many great dividend stocks in the past year is giving investors a chance to buy at low prices and secure attractive dividend yields.

Enbridge

Enbridge (TSX:ENB) is a giant in the North American energy infrastructure industry. The company moves roughly 30% of the oil produced in Canada and the United States. It also transports 20% of the natural gas used by American businesses and homes. In addition, Enbridge has natural gas utilities, export facilities, and renewable energy assets.

Enbridge increased its dividend in each of the past 28 years. The stock currently offers a 7.7% dividend yield trading below $47 per share. ENB topped $59 at the peak in 2022.

The drop in the share price appears exaggerated. Enbridge is on track to deliver solid financial results for 2023 with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) expected to be at least $15.9 billion compared to $15.5 billion in 2022. Distributable cash flow (DCF) should be close to the 2022 results of $5.42 per share.

Management expects EBITDA to expand by about 5% per year over the medium term, driven by $19 billion in capital investments, strategic acquisitions, and efficiency improvements across the businesses.

As a result, investors should see dividend increases continue in the 3-5% range.

BCE

BCE (TSX:BCE) is another top TSX dividend stock that looks oversold. The share price is currently below $55 per share compared to more than $73 at one point last year. The drop is giving investors a chance to get a 7% dividend yield from the communications giant. BCE raised its dividend by at least 5% in each of the past 15 years.

The stock is down due to the impact of soaring interest rates and some revenue challenges in the media business. Higher rates make borrowing more expensive for companies like BCE that use debt as part of their funding strategy to finance capital investments. BCE is spending billions of dollars on network upgrades, including its 5G mobile network and the expansion of the fibre-to-the-premises program. Higher borrowing costs can put a dent in profits and cash flow available for distributions.

BCE is trimming headcount to adjust to the lower ad spending in the media group and expects profits to decline in 2023. However, the core mobile and internet subscription businesses remain strong, and BCE expects full-year revenue and free cash flow to be above the 2022 results.

This should support another decent dividend increase for 2024.

The bottom line on top dividend stocks for passive income

Enbridge and BCE are industry leaders paying great dividends that should continue to grow. If you are searching for high-yield stocks to buy to help offset the impact of inflation, these stocks look cheap 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 Enbridge. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker owns shares of BCE and Enbridge.  

More on Dividend Stocks

data analyze research
Dividend Stocks

3 Undervalued Stocks to Watch in November

Not all undervalued and discounted stocks are destined or poised to make a comeback soon, and a protracted timeline can…

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

The Perfect TFSA Stocks for Long-Term Growth

Two industry heavyweights are perfect stock holdings in a TFSA for long-term money growth.

Read more »

Make a choice, path to success, sign
Dividend Stocks

Is Fortis Stock a Buy for its Dividend Yield?

Fortis has increased the dividend for 51 consecutive years.

Read more »

Middle aged man drinks coffee
Dividend Stocks

Is Brookfield Stock a Buy, Sell, or Hold for 2025?

BAM stock recently jumped after beating earnings. But is it still a buy, or is it better to wait?

Read more »

Electricity transmission towers with orange glowing wires against night sky
Dividend Stocks

3 Top Canadian Utility Stocks to Buy in November

Are you looking for some top Canadian utility stocks to own? Here's a look at three must-have options for any…

Read more »

View of high rise corporate buildings in the financial district of Toronto, Canada
Dividend Stocks

Is First Capital REIT a Buy for its 4.8% Yield?

First Capital is a REIT that offers you a tasty dividend yield of 4.8%. Is this TSX dividend stock a…

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

TFSA Passive Income: 3 Stocks to Buy and Never Sell

Stocks like Fortis Inc (TSX:FTS) are worth holding long term.

Read more »

Electricity transmission towers with orange glowing wires against night sky
Dividend Stocks

Canadian Utility Stocks to Buy Now for Stable Returns

Given their regulated business, falling interest rates, and healthy growth prospects, these three Canadian utility stocks are ideal for earning…

Read more »