2 Cheap Dividend Stocks to Boost Your Passive Income

Bank of Nova Scotia and TC Energy pay attractive dividends that should continue to grow.

| More on:
Various Canadian dollars in gray pants pocket

Image source: Getty Images

The pullback in the share prices of top TSX dividend stocks is giving retirees and other investors seeking passive income a chance to get high yields from great dividend payers while setting up their portfolios for a shot at some decent capital gains on a rebound.

Bank of Nova Scotia

Bank of Nova Scotia (TSX:BNS) trades near $60 per share at the time of writing compared to $74 in February and as high as $93 at the peak in 2022.

The board raised the dividend earlier this year, despite the headwinds facing the bank sector. Investors are concerned that high interest rates will remain in place for too long as the Bank of Canada fights to get inflation down to its 2% target. Rate hikes take up to 18 months to work their way through the economy, according to economists, so there is a risk that the central bank has been too aggressive with its rate increases.

Households are already struggling with rising mortgage costs along with the jump in the cost of living. If a deep recession occurs and unemployment spikes, there could be a wave of loan defaults and bankruptcies. This would be bad news for Bank of Nova Scotia and its peers.

That being said, economists generally anticipate a short and mild recession will occur in 2024 or 2025. Assuming they are correct, BNS stock is probably oversold right now. Investors who buy Bank of Nova Scotia at the current level can get a 7% dividend yield.

TC Energy

TC Energy (TSX:TRP) owns and operates more than 90,000 km of natural gas pipelines and 650 billion cubic feet of natural gas storage capacity in Canada, the United States, and the Caribbean. The company also has oil pipelines and power-generation facilities.

Management plans to spin off the liquids pipeline assets into a separate business to unlock value and raise cash to help fund the capital program. TC Energy is also selling stakes in some of its non-core gas assets. In 2023, the company already completed deals for $5.3 billion. The funds help shore up the balance sheet after TC Energy’s Coastal GasLink project saw its budget jump from about $6 billion to an estimated $14.5 billion. Fortunately, Coastal Gas Link has achieved mechanical completion, so investors can focus on other growth initiatives.

TC Energy’s assets are performing well. Growth in comparable earnings before interest, taxes, depreciation, and amortization (EBITDA) should be near the upper end of the 5-7% guidance for 2023, despite all the challenges faced during the year. Management expects the remaining capital program to generate adequate revenue and cash flow growth to support planned annual dividend increases of 3-5%.

TC Energy trades for close to $50 per share at the time of writing. The stock was as high as $74 last year. Investors who buy TRP stock at the current level can get a 7.4% dividend yield.

The bottom line on top stocks for passive income

Bank of Nova Scotia and TC Energy pay attractive dividends that should continue to grow. If you have some cash to put to work in a portfolio targeting 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 recommends Bank Of Nova Scotia. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker has no position in any stock mentioned.

More on Dividend Stocks

analyze data
Dividend Stocks

Adjusting Your Portfolio for the New Normal: Higher Interest Rates in Canada

The 5% interest rate is here to stay until the second half of 2024. It's time to adjust your portfolio…

Read more »

stock research, analyze data
Dividend Stocks

2 Top Stocks to Buy With $500 Today

Investing in the stock market does not always require massive capital. You can begin with just $500 allocated to stocks…

Read more »

Gas pipelines
Dividend Stocks

Is Enbridge Stock a Buy for its Big Dividend?

Enbridge is down more than 10% over the past year. Should you buy the dip?

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

Are These the Best Canadian Dividend Stocks for a High-Rate Environment?

Are you looking for some of the best Canadian dividend stocks to buy? Here are two top picks for decades…

Read more »

eat food
Dividend Stocks

Maple Leaf Foods: Bringing Home the Bacon With a Tasty Dividend

Maple Leaf Foods is a stock with a reliable 3.44% dividend yield, which is backed by a defensive business in…

Read more »

Dollar symbol and Canadian flag on keyboard
Dividend Stocks

Got $500? 2 Top Canadian Stocks to Buy in December 2023

These two top Canadian stocks are doing well and might warrant a place in your self-directed portfolio before the year…

Read more »

A stock price graph showing growth over time
Dividend Stocks

Up 8% in 3 Months, Is Fortis Stock a Buy Today?

Fortis stock (TSX:FTS) continued to show signs of recovery this fall, but as we enter a new year, is the…

Read more »

gold stocks gold mining
Dividend Stocks

The Best TSX Stocks to Invest $5,000 in December 2023

A Big Bank and a senior gold company are the best buys if you’re shopping for stocks in December 2023.

Read more »