The current state of the stock market is a nirvana for dividend seekers who want to boost their passive income. The high-interest rates and uncertainty about a recession have pushed some dividend stocks to their pandemic lows, creating a buying opportunity. Some of the best TSX dividend stocks are in the energy, real estate, telecom, and banking sectors.
A top dividend stock for your passive income portfolio
My stock pick for today is Telus Corporation (TSX:T), Canada’s third largest telco after BCE and Rogers Communications. Together, the three dominate the Canadian telecom market. While telcos face competition from satellite internet services, they are unlikely to replace the ground telco infrastructure.
Telus was a key beneficiary of scaling in the 4G era of digitization. Between 2011 and 2021 (4G era), Telus grew its dividend at a compounded annual growth rate (CAGR) of 8%. Even now, it increased its 2023 dividend by 7.3%. The company aims to grow its dividends by 7-10% annually by 2025 on the back of the 5G uptick.
All telecom stocks have dipped closer to their pandemic lows, creating an opportunity to lock in higher yield. It is not like Telus will vanish into thin air. The company is feeling downward pressure because of its high debt of over $26.5 billion. All telco stocks carry significant debt on their balance sheet and are feeling the pressure of higher interest expenses.
Regular cash flows from subscriptions will help Telus maintain its current annual dividend of $1.43 per share. While there will be some slowdown in the short term due to delays in the adoption of the Internet of Things (IoT), the long-term growth prospects remain bright as the 5G ecosystem facilitates drone deliveries and autonomous vehicles.
How can you make the most of Telus’s dividend growth?
Buy 848 shares of this stock and get $319 in monthly passive income
Now is a good time to make a lump sum investment in Telus as it trades at its multi-year low below $22.4. A $19,000 investment can buy you 848 shares of Telus and give $1,212 in annual dividends or $101/month. Telus gives quarterly payouts, but you can determine when to withdraw dividends.
When you don’t need that extra cash, you can consider opting for Telus’s dividend reinvestment plan (DRIP). The company’s dividend policy is at management’s discretion. They might discontinue DRIP anytime if the financial situation calls for it.
I have prepared a table assuming Telus keeps its DRIP active for the next 11 years and even grows dividends at a CAGR of 6%. The way dividend compounds, first by reinvestment and next by dividend growth, Telus stock can triple your monthly payout to $319/month by 2034.
| Telus Stock Price | Year | Annual Investment | Telus DRIP Shares | Telus Share count | Telus Dividend per share (6% CAGR) | Total dividend |
| $22.40 | 2024 | $19,000.00 | 848.0 | 848.0 | $1.4294 | $1,212.13 |
| $29.00 | 2025 | $1,212.13 | 42.0 | 890.0 | $1.52 | $1,348.50 |
| $29.00 | 2026 | $1,348.50 | 46.0 | 936.0 | $1.61 | $1,503.29 |
| $29.00 | 2027 | $1,503.29 | 52.0 | 988.0 | $1.70 | $1,682.01 |
| $29.00 | 2028 | $1,682.01 | 58.0 | 1046.0 | $1.80 | $1,887.60 |
| $29.00 | 2029 | $1,887.60 | 65.0 | 1111.0 | $1.91 | $2,125.19 |
| $35.00 | 2030 | $2,125.19 | 61.0 | 1172.0 | $2.03 | $2,376.38 |
| $35.00 | 2031 | $2,376.38 | 68.0 | 1240.0 | $2.15 | $2,665.12 |
| $35.00 | 2032 | $2,665.12 | 74.0 | 1314.0 | $2.28 | $2,993.62 |
| $35.00 | 2033 | $2,993.62 | 85.0 | 1399.0 | $2.41 | $3,378.50 |
| $35.00 | 2034 | $3,378.50 | 97.0 | 1496.0 | $2.56 | $3,829.52 |
How to make the most of this top dividend stock
We consider a lump sum investment of $19,000, over three times the $6,500 Tax-Free Savings Account’s (TFSA) contribution.
If you have any growth stocks in your TFSA that have generated satisfactory returns, you can consider selling some. It is a good practice to rebalance your portfolio between intervals to keep it ready for all market cycles. Suppose you allocate 60% of your portfolio on growth stocks and 40% on dividend stocks. A well-performing growth stock will increase the growth portion of the portfolio.
Just like you prune trees to maintain balanced and healthy growth, you can sell some growth stocks and invest in dividend stocks to achieve the target allocation. This way, you can sell the stocks others are buying and buy stocks others are selling.
