Stocks that provide essential services or products often have reliable and predictable revenue streams that support solid dividend payouts. The correction in the share prices of some top TSX dividend stocks is giving investors a chance to get decent yields and potentially generate attractive capital gains on a recovery.
BCE
BCE (TSX:BCE) is Canada’s largest communications company with wireless and wireline networks that provide mobile, internet, TV, and security services to homes and businesses across the country. The company also owns media assets, including a television network, radio stations, specialty channels, and interests in sports teams.
There is a good chance that a BCE asset is involved, either directly or indirectly, when someone in Canada sends a text, calls a friend, watches the news, streams a movie, or checks e-mail.
That’s a powerful business.
BCE stock trades close to $53.50 at the time of writing compared to more than $73 in April last year.
The steep decline is largely due to soaring interest rates. BCE uses debt as part of its funding for capital programs. As borrowing costs increase, there can be a negative impact on profits and the amount of money that is available for distribution to shareholders. BCE is also seeing a slowdown in advertising spending in its traditional media businesses. This led the company to announce staff cuts earlier this year.
The overall business, however, continues to perform well. BCE expects revenue and free cash flow to expand in 2023 compared to last year. That should support another dividend increase for 2024. BCE raised the dividend by at least 5% per year over the past 15 years.
At the current share price, BCE stock provides a 7.2% yield.
Enbridge
Enbridge (TSX:ENB) is a giant in the energy infrastructure industry with pipelines running across the country that move oil, natural gas, natural gas liquids, and fuel that comes from the refineries. Enbridge’s millions of natural gas customers interact with the company directly. However, the gasoline at the service station, fuel in an airplane, propane used for the BBQ or natural gas provided by another utility might have travelled across part of Enbridge’s network at some point.
Enbridge’s latest investments have largely focused on the United States. The company recently announced a US$14 billion deal to acquire three natural gas utilities south of the border. Last year, Enbridge purchased the third-largest renewable energy developer in the United States. Two years ago, Enbridge spent US$3 billion to buy an oil export terminal in Texas. The company’s natural gas pipelines already move 20% of the natural gas used in the United States.
Enbridge trades near $46 at the time of writing. The stock was at $59 in June 2022. Management expects the assets to deliver steady revenue and cash flow growth in the coming years to support ongoing dividend increases.
Enbridge raised the payout in each of the past 28 years. At the current share price, investors can get a 7.7% dividend yield.
The bottom line on top dividend stocks
BCE and Enbridge are industry leaders that provide essential services homes and businesses need, regardless of the state of the economy. If you have some cash to put to work, these stocks look cheap today and deserve to be on your radar.
