After another round of volatility hit the market, the S&P/TSX Composite Index is down by 5.65% from its 52-week highs. The weakness in Canada’s benchmark index means a pullback in stocks across the board. It also means several of the top TSX dividend stocks have seen yields rise.
Much like the crash of 2020, it can be a good opportunity to scoop up shares of top dividend stocks at discounted rates to capture high-yielding dividends. If you still have some contribution room in your Tax-Free Savings Account (TFSA) right now and want to allocate a portion of it to income-generating assets for tax-free passive income, now’s the time to invest in high-quality dividend stocks.
Today, we will look at three such dividend stocks that can be mainstays in an income-focused self-directed TFSA portfolio.
BCE
BCE Inc. (TSX:BCE) is a $47.6 billion market capitalization giant in the Canadian telecom space. As Canada’s largest player in the communications market, it generates substantial cash flows through its mobile and internet subscription services. Despite being in a strong competitive position in its industry, BCE stock is feeling the pressure of higher interest rates.
Companies that spend billions annually on capital projects tend to take on debt to fund some of their capital projects. While it might lead to a decline in adjusted earnings per share this year, these investments will likely result in increased free cash flow and operating revenue. As of this writing, BCE trades for $52.22 per share, boasting a 7.41% dividend yield.
TC Energy
TC Energy (TSX:TRP) is a $49.4 billion market capitalization giant in the North American energy sector. Headquartered in Calgary, the company owns, develops, and operates an extensive network of energy infrastructure across Canada, the US, and Mexico.
Like other companies, it is also facing a crunch due to increased debt loads amid high-interest-rate market environments. However, its latest $34 billion capital program is expected to drive substantial cash flow and revenue growth.
As of this writing, it trades for $47.67 per share, boasting a 7.80% dividend yield. While alarmingly high, the energy infrastructure developer still expects to support annual dividend hikes of at least 3% in the medium term. Its Coastal GasLink pipeline, which accounted for a lot of its expenses, is set to be completed soon, which could yield high production for the company and increase shareholder value.
Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS) is a $73 billion market capitalization Canadian bank. Operating as Scotiabank, the Toronto-based financial institution is one of Canada’s Big Six banks, ranking third by deposits and market capitalization.
While it has underperformed its closest peers in recent years, the appointment of a new chief executive officer earlier this year might make the difference it needs.
While expecting to announce major strategic shifts in the investor presentation on December 13, the bank is generating good profits.
Despite higher provisions for credit losses, higher interest rates have raised its profits. Where most other companies face pressure due to higher interest rates, lenders like Scotiabank stock see better margins.
As of this writing, it trades for $60.53 per share, boasting a 7.00% dividend yield that it pays at a quarterly schedule.
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Foolish takeaway
BCE stock, TC Energy stock, and Scotiabank stock pay attractive dividends. While the market downturn might have inflated yields to higher-than-usual levels, it can be a good thing. You can lock in higher-yielding dividends by investing now.
In the long run, your TFSA portfolio can grow due to a combination of capital gains and high-yielding dividends lining your account balance.
