Canadian investors seeking passive income from a Tax-Free Savings Account (TFSA) or total returns inside a self-directed Registered Retirement Savings Plan (RRSP) can still get great deals on top TSX dividend stocks. Buying unloved high-yield stocks on pullbacks takes some courage, but the long-term gains can be significant for a buy-and-hold portfolio.
Telus
Telus (TSX:T) trades for close to $25 at the time of writing. The stock was as low as $21 in early October, but still sits way off the $34 mark it hit in 2022.
The pullback appears overdone considering the fact that Telus expects to generate consolidated revenue growth of at least 9.5% in 20223 and has confirmed guidance for growth in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of at least 7%. That’s not bad in a challenging economic environment.
The stock is down due to rising interest rates and challenges faced by the Telus International subsidiary. Higher borrowing costs will put a dent in profits, and Telus cut 6,000 jobs this year as part of its efforts to streamline the business and adjust to weaker revenue at the subsidiary that provides international companies with call centre and IT services.
The core Canadian mobile and internet subscription businesses, however, continue to perform well and should support ongoing dividend growth. At the current share price, investors can get a 6% dividend yield. Telus has increased the payout annually for more than two decades.
Enbridge
Enbridge (TSX:ENB) just announced its 29th consecutive annual increase to the dividend. The board raised the payout by 3.1% for 2024. This is good news for investors who might have had doubts about the sustainability of Enbridge’s dividend. The distribution’s yield hit 8% in October and is currently around 7.7%.
Enbridge has a $24 billion capital program on the go to drive revenue and cash flow growth in addition to the anticipated benefits from acquisitions. The company recently entered a US$14 billion agreement to buy three natural gas utilities in the United States. These businesses provide steady rate-regulated cash flow and bring opportunities for adding new projects to the capital program.
Enbridge is diversifying its revenue stream to take advantage of market shifts. In the past two years, the company acquired an oil export terminal, a stake in a liquified natural gas (LNG) export development project, and added to its renewable energy portfolio. Oil and gas exports are expected to grow in the coming years, along with the expansion of solar and wind power.
Enbridge trades near $47.50 at the time of writing compared to $59 at the peak last year.
Bank of Nova Scotia
The new chief executive officer at Bank of Nova Scotia (TSX:BNS) spent most of this year putting new faces in senior roles as part of an effort to drive better returns for shareholders. Investors will get more information about a strategic shift at the December 13th meeting. Bank of Nova Scotia has already announced a 3% cut to its staff count, and pundits speculate the bank could decide to sell some non-core international assets. Bank of Nova Scotia has businesses in Mexico, Peru, Chile, and Colombia. The Latin American markets hold attractive growth potential as the middle class expands, but investors have not reaped the rewards from the big bets on the region.
BNS stock trades for close to $60 at the time of writing compared to more than $90 in early 2022. There is decent upside potential if the new management team can orchestrate a turnaround. Investors who buy at the current level get paid a solid 7% dividend yield to wait.
The bottom line on cheap dividend stocks
Telus, Enbridge, and Bank of Nova Scotia all pay attractive dividends that should continue to grow. If you have some cash to put to work, these stocks look cheap today and deserve to be on your radar.
