The pullback in the share prices of several great Canadian dividend stocks is giving retirees seeking passive income a chance to pick up high yields from TSX stocks that have solid track records of dividend growth.
Buying stocks on dips takes some courage and the patience to ride out the additional downside, but the strategy can also drive up returns on savings and potentially produce decent capital gains on a market recovery.
Enbridge
Enbridge (TSX:ENB) raised its dividend in each of the past 28 years. Recent annual increases have been in the 3% range, and investors should expect to see dividend growth of 3-5% continue over the medium term. Enbridge is now a giant in the North American energy infrastructure industry, so it takes a big project or a large acquisition to move the revenue and cash flow needle enough to have a significant impact.
Management is doing a good job of diversifying the revenue stream to take advantage of shifts in the energy industry. Enbridge purchased an oil export terminal in Texas in 2021 and has secured a stake in the Woodfibre liquified natural gas (LNG) export facility being built on the coast of British Columbia. In addition, Enbridge bought an American developer of wind and solar projects and just announced a US$14 billion deal to buy three natural gas utilities in the United States.
These acquisitions and the ongoing capital program should support dividend growth.
Enbridge trades near $45 at the time of writing compared to $59 at the high point last year. Investors who buy the dip can now get a 7.8% dividend yield.
BCE
BCE (TSX:BCE) is another example of a TSX industry leader with a great track record of delivering reliable dividends to investors seeking passive income. The board increased the dividend by at least 5% in each of the past 15 years.
BCE’s share price trades close to $53 at the time of writing compared to $65 earlier this year. The sharp decline is largely due to soaring interest rates and some revenue challenges in the media group. BCE uses debt to finance part of its capital program, so higher borrowing costs can put a pinch on profits. BCE expects adjusted earnings per share to slip in 2023 as a result.
Strength in the core mobile and internet businesses should offset the current challenges in the media division. BCE is targeting overall growth in revenue and free cash flow this year.
Investors can currently get a 7.3% dividend yield from BCE stock.
The bottom line on top stocks to buy for passive income
Enbridge and BCE 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.
