Investors seeking reliable and growing passive income have an opportunity to buy top TSX dividend stocks at discounted prices. Adding stocks during a pullback requires conviction, but the contrarian strategy can boost yields and potentially deliver attractive long-term capital gains.
BCE
BCE (TSX:BCE) trades for close to $54.50 at the time of writing compared to $65 in May this year and above $70 at the high point in 2022.
The drop gives investors a chance to get a 7.1% dividend yield from one of the best dividend stocks on the TSX index. BCE has increased its distribution by at least 5% in each of the past 15 years. The company gets most of its revenue from mobile and internet services that businesses and households need regardless of the state of the economy.
BCE is on track to generate revenue growth and free cash flow growth in 2023. Earnings will dip a but due to the impact of higher borrowing costs, but the decline in the share price looks overdone.
CIBC
CIBC (TSX:CM) just increased its dividend for the second time in 2023. This suggests the board is comfortable with the earnings outlook, even as the bank sets more cash aside to cover potential bad loans.
The sharp increase in interest rates over the past 18 months is putting pressure on businesses and households with too much debt. As a result, banks are seeing an increase in the number of customers who are behind on loan payments or look like they might be heading that way. Provisions for credit losses are expected to continue to climb in the next few quarters, but CIBC’s overall loan book looks solid and the bank has a good capital cushion to ride out some turbulent times.
Investors should anticipate additional volatility in the bank sector until there is clarity on the full impact of the rate hikes put in place by the Bank of Canada and the U.S. Federal Reserve to get inflation under control. However, CIBC already looks cheap at the current level. The shares trade near $56.50 compared to more than $80 in early 2022. Investors who buy CM stock today can get a 6.35% dividend yield, so you get paid well to wait for the rebound.
Fortis
Fortis (TSX:FTS) has raised its dividend in each of the past 50 years and intends to boost the payout annually by at least 4% through 2028. That’s the kind of track record and guidance that buy-and-hold dividend investors should look for when seeking out stocks to add to their self-directed Registered Retirement Savings Plan or Tax-Free Savings Account portfolios.
Fortis operates power generation stations, electric transmission networks, and natural gas distribution utilities. These assets generate predictable rate-regulated revenue in all economic conditions. Fortis is working on a $25 billion capital program that will significantly increase the rate base over the next five years to support the planned dividend increases.
At the time of writing, Fortis provides a 4.3% dividend yield. The stock trades near $55 compared to more than $60 earlier this year and a high of around $65 in 2022.
The bottom line on top TSX dividend stocks
BCE, CIBC, and Fortis all pay good dividends that should continue to grow. If you have some cash to put to work heading into 2024, these stocks still look cheap and deserve to be on your radar.
