Retirees: 2 High-Yield Dividend Stocks to Buy for Passive Income

Top TSX dividend stocks are on sale.

| More on:

The correction in the share prices of many top TSX dividend stocks is giving retirees and other investors seeking passive income a chance to buy great Canadian dividend stocks at cheap prices.

BCE

BCE (TSX:BCE) is a good example of a dividend-growth stock that looks oversold and now offers a high yield. The shares trade below $52 at the time of writing compared to $65 earlier this year.

The decline might be exaggerated, considering the company’s core mobile and internet services businesses are needed by customers in all economic conditions and generate steady revenue and cash flow.

BCE continues to make investments to drive future growth. The company spent about $5 billion last year on capital initiatives, including the 5G mobile network and the expansion of fibre-optic lines to the premises of its customers. These projects are expensive, but they help protect BCE’s competitive position and should lead to revenue expansion in the coming years. BCE’s share price pullback is largely due to the sharp increase in interest rates that is driving up debt costs. Once the Bank of Canada signals it is done raising rates to fight inflation, there could be a meaningful rally.

On the operational side, BCE’s media business is struggling with lower ad sales across the TV and radio platforms. This trend could continue for some time, but the media division is small compared to the core mobile and internet operations that continue to perform well.

BCE expects profits to dip this year due to higher borrowing costs, but overall revenue and free cash flow are predicted to grow. That should support the dividend heading into 2024. BCE increased the payout by at least 5% annually over the past 15 years. Investors can currently get a 7.5% dividend yield on BCE stock.

CIBC

CIBC (TSX:CM) increased its dividend earlier this year. That should be a signal to investors that the management team is confident in the bank’s ability to continue to generate solid profits, even as rising interest rates drive up provisions for loan losses and create economic headwinds.

CIBC stock trades near $48 per share at the time of writing. It was as high as $83 in early 2022. Bank stocks are broadly under pressure as investors worry that the Bank of Canada and the United States Federal Reserve will trigger a deep economic decline as they battle to get inflation back to the 2% target. Inflation in September was just under 4%.

Rate hikes take time to work their way through the economy. This lag is the reason investors think interest rates have potentially gone too high and might stay elevated for too long. In the scenario where a deep recession occurs and unemployment surges, there could be a wave of commercial and household bankruptcies.

That being said, economists widely expect a soft landing for the economy. If that situation materializes, CIBC is probably oversold today. The bank remains very profitable, and management has built up a solid capital cushion to ride out difficult times.

Investors who buy CM stock at the current level can get a 7% dividend yield.

The bottom line on high-yield stocks for passive income

BCE and CIBC pay attractive dividends that should continue to grow. If you have some cash to put to work in a portfolio focused on passive income, these stocks look cheap today and deserve to be on your radar.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker owns shares of BCE.

More on Dividend Stocks

people relax on mountain ledge
Dividend Stocks

Top Canadian Stocks to Buy for Passive Income 

Are you building a passive income portfolio that can beat inflation and provide higher purchasing power? You could consider buying…

Read more »

voice-recognition-talking-to-a-smartphone
Dividend Stocks

1 Magnificent Canadian Dividend Stock Down 40 Percent to Buy and Hold Forever

This magnificent Canadian dividend stock trades at a huge discount, offers stellar growth, and pays one of the best yields…

Read more »

A plant grows from coins.
Dividend Stocks

Top Canadian Stocks to Buy for Dividend Growth

Dividend growth stocks can be a good option to build a passive income that beats inflation and improves buying power.

Read more »

Concept of multiple streams of income
Top TSX Stocks

The Best Stocks to Invest $1,000 in Right Now

Here are some of the best stocks that every investor should own today to generate massive income and strong growth…

Read more »

The TFSA is a powerful savings vehicle for Canadians who are saving for retirement.
Dividend Stocks

Trump’s Tariffs Could Hurt Your TFSA – But These 2 Stocks Will Keep it Safe

Worried about tariffs coming down? Then consider these two stocks to keep your portfolio safe.

Read more »

concept of real estate evaluation
Dividend Stocks

3 Top Real Estate Sector Stocks for Canadian Investors in 2025 

The Canadian real estate sector could see modest growth in 2025, but its long-term secular demand remains intact.

Read more »

Dividend Stocks

Buy These 3 Canadian Stocks Before Tariffs Change the Game

These three dividend stocks offer security, growth -- you name it. No matter what tariffs come our way.

Read more »

data analyze research
Dividend Stocks

This 7.6% Dividend Stock Is a Must-Buy as Trump’s Tariffs Hit Canada

If there's one way to add some consistency to your portfolio, it's an investment in a passive-income powerhouse like this…

Read more »