Canadians can consider holding undervalued dividend stocks in a TFSA (Tax-Free Savings Account). In addition to a high dividend yield, investors are positioned to benefit from capital gains over time, making beaten-down TSX stocks an enticing investment option. Moreover, any income generated in a TFSA in the form of dividends or capital gains is exempt from Canada Revenue Agency taxes.
Here are three high-dividend TSX stocks that I’d buy right now.
SmartCentres REIT stock
Among Canada’s largest integrated real estate investment trusts (REITs), SmartCentres REIT (TSX:SRU.UN) is valued at a market cap of $3.7 billion. With $11.8 billion in assets, the REIT owns and operates 34.9 million square feet of income-generating retail and first-class office space with high occupancy rates.
SmartCentres REIT pays shareholders an annual dividend of $1.85 per share, indicating a forward yield of 8.7%, which is quite tasty. Moreover, the REIT announced a $16 billion intensification program consisting of rental apartments, condos, hotels, storage facilities, and senior residences, which should drive future cash flows and dividend payouts higher. The intensification program should also add an additional 40.4 million square feet of space for the REIT.
Down 44.6% from all-time highs, the TSX dividend stock also trades at a discount of 34% to consensus price target estimates.
Pembina Pipeline stock
An energy infrastructure company, Pembina Pipeline (TSX:PPL) offers shareholders an annual dividend of $2.67 per share, translating to a forward yield of 6.3%. In the last 10 years, Pembina Pipeline has increased its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) at an annual rate of 12%, while dividends have increased by 5%, showcasing the resiliency of its business.
Pembina Pipeline generates steady cash flows and is relatively immune to fluctuations in commodity prices. Around 82% of its EBITDA is tied to take-or-pay contracts, while its difficult-to-replicate assets provide the energy company with a competitive moat.
Despite the cyclical nature of the energy sector, Pembina Pipeline has maintained or increased dividends since 1998. It ended 2022 with a payout ratio of less than 60%, providing it with the flexibility to reinvest in growth, increase dividends, or lower balance sheet debt.
Priced at 15 times forward earnings, PPL stock also trades at a discount of 18% to consensus price target estimates.
Great-West Lifeco stock
The final TSX dividend stock on my list is Great-West Lifeco (TSX:GWO), which currently offers you a yield of 5.5%. One of the largest companies in Canada, Great West is a financial behemoth engaged in verticals such as life and health insurance, retirement and investment services, asset management, and reinsurance.
Despite a challenging macro environment, Great-West increased its base earnings by 2% to $0.99 per share. The increase was driven by higher investment returns, strong performance in the capital and risk solutions business, and higher fees.
Priced at 9.8 times forward earnings, GWO stock is quite cheap, given Bay Street expects adjusted earnings to rise by 6.5% annually in the next five years. Analysts remain bullish and expect shares to rise by 8% in the next 12 months.
