The Tax-Free Savings Account (TFSA) limit is $6,500 in 2023. Investors with contribution room available have an opportunity right now to buy top TSX dividend stocks at discounted prices for portfolios focused on passive income and total returns.
TC Energy
TC Energy (TSX:TRP) trades for close to $50 per share at the time of writing compared to more than $70 at the high point last year.
A sharp rise in interest rates in Canada and the United States is largely to blame for the pullback, although TC Energy has also had issues with a major pipeline project. Construction of the Coastal GasLink pipeline is finally complete, but the cost has more than doubled to about $14.5 billion. The third quarter (Q3) of 2023 results come out on November 8, so investors should get an update on the situation including the anticipated start date for delivering natural gas from producers to a new liquified natural gas (LNG) export facility being built on the coast of British Columbia.
TC Energy is selling stakes in some of its existing assets to raise excess cash in order to strengthen the balance sheet and help fund the remaining parts of the capital program. Management already closed deals for $5.3 billion this year. TC Energy also intends to spin off the oil pipelines business and is considering the sale of other assets, including the operations in Mexico.
Near-term volatility should be expected, but the stock already looks cheap and investors can now get a 7.5% dividend yield. TC Energy has increased the payout annually for more than two decades and intends to boost the payout by at least 3% per year over the medium term.
Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS) is a contrarian pick in the Canadian bank sector. The stock has underperformed its large peers in recent years, but the new chief executive officer (CEO) is determined to drive better shareholder returns going forward. Bank of Nova Scotia is wrapping up a strategic review of the overall business and recently announced plans to cut 3% of the staff.
Investors could see the bank shift its international strategy away from Latin America, where Bank of Nova Scotia has operations in Mexico, Peru, Chile, and Colombia. Mexico will likely remain part of the mix based on the new CEO’s comments earlier this year about the opportunities in the country. However, the operations in the other three countries might get sold with the proceeds used to target growth opportunities in different markets. Bank of Nova Scotia’s large Canadian competitors have focused on the United States in recent years.
Bank of Nova Scotia trades for close to $59 per share at the time of writing compared to $93 at one point in 2022. The drop looks exaggerated, even as the bank sector faces some headwinds due to rising interest rates.
Bank of Nova Scotia raised the dividend earlier this year. The bank remains very profitable and has a solid capital cushion to get through some tough times. At 9.3 times trailing 12-month earnings, the stock trades at a level that likely assumes a worse economic outlook than the projection from most economists.
Investors who buy Bank of Nova Scotia stock at the current share price can get a 7.2% dividend yield.
The bottom line on top TSX dividend stocks
TC Energy and Bank of Nova Scotia pay attractive dividends that should continue to grow. If you have some cash to put to work in a TFSA or RRSP, these stocks deserve to be on your radar.
