The surge in the share prices of oversold dividend stocks has many Canadian pensioners wondering if they can still get good deals on top TSX dividend-growth stocks that offer high yields.
Telus
Telus (TSX:T) trades for close to $24.50 at the time of writing. The stock is off the 2023 low around $21 but is still way down from the $34 it reached in 2022.
Telus gets most of its revenue from mobile and internet subscriptions. These are essential services that businesses and households need, regardless of the state of the economy. Telus expects consolidated revenue to rise by at least 9.5% in 2023 and is targeting decent growth in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). Despite the positive performance of the core divisions, the stock has taken a hit this year.
Part of the decline is due to weaker revenue in the Telus International subsidiary that provides multi-lingual customer care and IT services to global firms. Telus reduced its headcount by 6,000 this year to adjust to the changing market conditions and to streamline the overall business. Telus International accounts for about 10% of EBITDA, so the group’s impact is relatively small.
High interest rates have also contributed to the decline in the share price. Investors might have shifted funds to safer alternatives, such as Guaranteed Investment Certificates. Rising borrowing costs on debt used to fund growth programs will also put a dent in profits.
Headwinds could persist in early 2024, but Telus looks oversold, given the quality of the core revenue stream. Investors who buy Telus at the current level can get a 6% dividend yield.
TC Energy
TC Energy (TSX:TRP) trades for close to $53 at the time of writing. That’s up from $45 in early October. Bargain hunters who bought the bottom are already enjoying nice gains, and more upside should be on the way. TC Energy traded above $70 at the peak last year.
The company has finally achieved mechanical completion on its 670 km Coastal GasLink project. The development ran into several issues in the past few years. Pandemic delays, bad weather, problems with contractors, and soaring material costs all drove up the price tag on the project. At this point, the total cost is expected to be in the range of $14.5 billion, which is more than double the initial estimate.
TC Energy is making progress on efforts to shore up the balance sheet and to raise funds for ongoing growth initiatives. The company sold a stake in some American assets for $5.3 billion this year and is on track to spin off the oil pipelines business in 2024.
Management expects EBITDA growth to come in around 8% for 2023. That’s pretty good, considering the challenges faced during the year. The natural gas transmission network and power-generation assets are performing well.
TC Energy plans to increase the dividend by at least 3% per year over the medium term. The board has increased the payout annually for more than two decades. Investors can currently get a 7% dividend yield from TRP stock.
The bottom line on top stocks for passive income
Telus and TC Energy pay attractive dividends that should continue to grow. If you have some cash to put to work, these stocks still look cheap and deserve to be on your radar.
