The pullback in the share prices of several great Canadian dividend stocks is giving investors a chance to get very attractive yields for self-directed portfolios focused on generating steady passive income.
TC Energy
TC Energy (TSX:TRP) trades near $47 per share at the time of writing compared to $74 at one point in 2022.
The company ran into a series of setbacks on its Coastal GasLink project in the past few years that have pushed up the costs of the natural gas pipeline to an estimated $14.5 billion, which is more than double the original budget.
That’s painful for investors to watch, and TC Energy has been forced to sell partial interests in some American assets this year to raise $5.3 billion to shore up the balance sheet. Management is also planning to spin off the oil pipelines division to raise additional cash. Monetizing other assets could follow.
On the positive side, Coastal GasLink is nearly finished and should be in commercial operation next year. TC Energy says its overall $34 billion capital program is still expected to support annual dividend growth of 3-5% over the medium term. Assuming TC Energy holds to that guidance, the stock is likely a good deal right now for patient investors.
At the current share price, TRP stock provides a 7.9% dividend yield.
Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS) just announced plans to trim its workforce by 3% to adjust to current market conditions and continue its efforts to make the bank more efficient. The stock dipped from $60 per share to $58.50 on the news.
Investors shouldn’t have been surprised by the announcement. Bank of Nova Scotia’s larger peers are also reducing staff levels this year.
A new chief executive officer took charge in 2023 and more changes could be on the way, as Bank of Nova Scotia evaluates its strategy. Pundits speculate the bank might sell some of its international operations and use the funds to target growth in other markets. For example, Bank of Nova Scotia has a large presence in Mexico, Peru, Chile, and Colombia. Mexico will likely remain strategically important, but the other three markets could be a different story.
The other members of the Big Five Canadian banks have looked to the U.S. for growth opportunities, and their share prices have outperformed Bank of Nova Scotia’s in recent years.
Bank of Nova Scotia is a contrarian pick, but there is decent upside potential on a turnaround, and the bank still generates strong profits. The board increased the dividend earlier this year, so there doesn’t appear to be too much concern about the earnings outlook.
Investors who buy BNS stock at the current level can get a 7.2% dividend yield.
The bottom line on top stocks for passive income
TC Energy and Bank of Nova Scotia pay attractive dividends that should continue to grow. Ongoing volatility should be expected, but these stocks already look cheap and deserve to be on your radar.
