Retirees seeking passive income and other investors more focused on total returns have a chance to buy top TSX dividend stocks at discounted prices for self-directed Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP) portfolios.
BCE
BCE (TSX:BCE) trades near $54.50 at the time of writing compared to $65 a few months ago and more than $70 at the 2022 high.
The steep decline appears overdone, considering the fact that BCE expects full-year 2023 revenue to grow 1-5%, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to grow 2-5% and free cash flow to grow 2-10% compared to last year.
Adjusted earnings per share will dip 3-7% due to rising debt costs, but the overall performance should be solid, even as the media division battles through a downturn in advertising spending.
BCE raised its dividend by at least 5% per year over the past 15 years. Another decent increase should be on the way for 2022. Investors can take advantage of the drop in the share price to get a 7% yield.
TC Energy
TC Energy (TSX:TRP) is a major player in the natural gas transmission sector in Canada, the United States, and Mexico, with more than 90,000 km of natural gas pipelines and 650 billion cubic feet of natural gas storage capacity.
The stock currently trades near $50 per share. It was also above $70 at the peak in 2022 but has been on a downward trend for most of the past year.
Soaring interest rates are to blame for the bulk of the decline. TC Energy and other infrastructure stocks typically grow through large development programs and acquisitions. Pipeline projects can take years to complete and often cost billions of dollars to build. TC Energy uses debt as part of its funding strategy to cover the costs of building new assets until they start generating revenue.
Higher borrowing costs can put a dent in profits and reduce cash flow available for distributions. Some projects might not even be feasible if the cost of funding climbs too high.
TC Energy has also taken a hit due to its Coastal GasLink pipeline project that is significantly over budget. The company expects the final bill to be at least $14.5 billion, which is more than double the initial projection.
On the upside, Coastal GasLink is more than 90% complete, and TC Energy still expects the total capital program of $34 billion to generate enough cash flow to support planned annual dividend increases of 3% to 5%.
At the time of writing, TRP stock offers investors a 7.4% dividend yield.
The bottom line on cheap TSX dividend stocks
Near-term volatility should be expected, but BCE and TC Energy pay attractive dividends that should continue to grow. If you have some cash to put to work, these stocks already appear oversold and deserve to be on your radar.
