The pullback in the share prices of Canadian dividend stocks over the past year is giving investors who missed the bounce off the 2020 crash a chance to buy top TSX dividend stocks at cheap prices for their self-directed Tax-Free Savings Account (TFSA) portfolios focused on passive income.
Enbridge
Enbridge (TSX:ENB) has increased its dividend in each of the past 28 years. The company expects 2023 earnings before interest, taxes, depreciation, and amortization (EBITDA) to be above 2022, supported by the completion of capital projects and strong demand for capacity on its Mainline pipeline network.
Looking ahead, Enbridge will continue to drive revenue growth from the remainder of its $17 billion capital program, along with any acquisition opportunities that might pop up. Enbridge is shifting its investment focus to take advantage of anticipated growth in oil and natural gas exports. The company is also expanding its renewable energy group.
ENB stock trades below $48 per share at the time of writing compared to above $59 at the 2022 high.
The drop looks overdone, considering the steady financial performance and growth initiatives. Investors who buy ENB stock at the current level can get a 7.4% dividend yield.
Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS) recently reported decent fiscal third-quarter (Q3) 2023 results, despite facing some macroeconomic headwinds. The bank generated adjusted net income of $2.23 billion in the quarter compared to $2.6 billion in the same period last year.
The steep rise in interest rates over the past year is starting to impact commercial and residential borrowers. Businesses and households with too much debt are burning through savings, as they struggle to cover increased loan expenses. This trend is expected to continue as the Bank of Canada keeps rates elevated in its effort to get inflation back down to 2%. Bank of Nova Scotia increased its provision for credit losses (PCL) to $819 million in the latest quarter compared to $412 million in the same period last year.
The number sounds big, but it is a fraction of the total lending portfolio, and the overall loan book remains in good shape.
Bank of Nova Scotia finished fiscal Q3 2023 with a common equity tier-one (CET1) ratio of 12.7%. This is comfortably above the 11.5% the regulators will require before the end of the year, so Bank of Nova Scotia is sitting on adequate capital to ride out a downturn.
BNS stock trades near $64.50 at the time of writing compared to $74 in February and more than $90 in early 2022. The drop looks exaggerated at this point, even if the economy is headed for a mild recession. The board raised the dividend when the bank reported the Q2 results, so the management team appears to be comfortable with the profit outlook.
Investors who buy BNS stock at the current level can get a 6.6% dividend yield.
The bottom line on top stocks for passive income
Enbridge and Bank of Nova Scotia are good examples of stocks that pay high-yield dividends that should continue to grow. If you have some cash to put to work in a TFSA portfolio focused on passive income, these stocks deserve to be on your radar.
