Rate hikes have caused a major pullback in some of Canada’s top dividend stocks over the past year, driving up yields to attractive levels. At current price points, investors can generate decent passive income on these TSX stocks and set themselves up for solid potential capital gains when the market rebounds.
Telus
Telus (TSX:T) trades for close to $24 per share at the time of writing compared to $34 at one point last year.
The drop appears overdone, even as Telus faces some challenges in its Telus International subsidiary, which provides IT and multi-lingual call centre services to global firms. Weak revenue numbers at Telus International forced Telus to reduce its guidance for 2023 and sparked a reduction of staff by about 6,000 positions.
Overall, however, Telus says it is still on track to generate growth in consolidated operating revenue of at least 9.5% this year compared to 2022. The core mobile and internet subscription businesses remain strong and should perform well, even if the economy goes through a recession next year.
Telus has increased its dividend annually for more than two decades. Investors can get a 6.2% dividend yield at the current share price.
Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS) is expected to announce the results of its strategic review in the coming weeks. The new chief executive officer has already put new faces into many senior positions at the bank. Investors might see a significant strategic pivot in the next few years, as the bank looks to improve shareholder returns.
Pundits speculate there could be a move to monetize operations in Chile, Colombia, Peru, and potentially even Mexico, where Bank of Nova Scotia has a large presence. These markets offer attractive long-term growth potential as the middle class expands, but the economic and political uncertainty in these countries likely contributed to Bank of Nova Scotia’s underperformance compared to its larger Canadian peers in recent years. The other big Canadian banks have focused more on the U.S. and other international markets.
Bank of Nova Scotia remains very profitable and has adequate capital to ride out some economic turbulence. The board raised the dividend earlier this year, so there doesn’t appear to be much concern about the profits outlook.
BNS stock trades for close to $60 at the time of writing compared to $93 at the peak in 2022. Investors who buy at the current level can get a 7% dividend yield.
Enbridge
Enbridge (TSX:ENB) raised its dividend in each of the past 28 years. The company’s performance through the first nine months of 2023 has been solid, and management says the business is on track to hit guidance for the year.
Despite the steady results, the stock is down about 20% from the 2022 high. Interest rate hikes are largely to blame, but the decline appears overdone.
Enbridge continues to diversify its revenue stream through strategic acquisitions and internal projects. The recently announced US$14 billion purchase of three natural gas utilities in the United States will add reliable rate-regulated revenue and will provide a boost to the capital program, now at $24 billion.
Enbridge trades below $46 at the time of writing compared to $59 at the high point last year. Investors who buy at the current level can get a 7.75% dividend yield.
The bottom line on top TSX dividend stocks
Bargain hunters have already started moving into Telus, Bank of Nova Scotia, and Enbridge in the anticipation that rate hikes are almost done. As soon as the Bank of Canada starts to cut rates, these stocks could surge.
If you have some cash to put to work, Telus, Bank of Nova Scotia, and Enbridge still look cheap and deserve to be on your radar.
