Canadian retirees are searching for TSX stocks that have good track records of dividend growth and offer attractive yields. The rally that occurred in the fourth quarter (Q4) of 2023 wiped out some of the best TSX deals, but investors can still find great Canadian dividend stocks trading at cheap prices.
BCE (TSX:BCE) is Canada’s largest communications firm with a current market capitalization of about $51 billion. The stock picked up some momentum late last year, rising from $50 to the current price near $56 per share, but this is still well below the 2023 high of around $65. BCE stock even topped $74 at one point in 2022, so there is decent upside potential for the next recovery.
BCE’s media business faced some revenue challenges in the past year as advertisers cut marketing budgets to preserve cash flow or switched spending away from radio and TV to digital alternatives. The legacy media assets could continue to struggle going forward, but BCE’s digital platforms are seeing revenue grow.
BCE’s core mobile and internet businesses continue to grow and are performing well, despite the economic headwinds. These are essential services for households and businesses, so the revenue stream should hold up well if there is a recession.
BCE is expected to report revenue growth and free cash flow growth for 2023, so the drop in the share price might be overdone. Most of the decline is due to rising interest rates. It is likely that rates have peaked in Canada and could begin to fall again in the coming months as the Bank of Canada makes progress in its fight against inflation.
BCE raised its dividend by at least 5% in each of the past 15 years. Investors who buy the stock at the current level can get a 6.9% dividend yield.
TC Energy (TSX:TRP) is a major player in the North American energy infrastructure industry, with more than 90,000 km of natural gas pipelines and 650 billion cubic feet of natural gas storage in Canada, the United States, and Mexico. The company also has oil pipeline and power-generation facilities.
TC Energy’s 670 km Coastal GasLink pipeline finally reached mechanical completion in 2023, but the final price tag is expected to be about $14.5 billion, which is more than double the original budget.
Management sold a stake in some U.S. assets for $5.3 billion last year to help reduce debt and shore up the balance sheet. Another $3 billion in asset sales is in the works for 2024. TC Energy intends to spin off the oil pipelines business into a separate company this year in a move to unlock more value for shareholders.
The overall business performed well in 2023 despite the project delays and the impact of rising borrowing costs. In the November 28 investor update, TC Energy said it expected 2023 comparable earnings before interest, taxes, depreciation, and amortization (EBITDA) to be about 8% above 2022. For 2024, comparable EBITDA growth is targeted at 5-7%.
This should support ongoing dividend growth. TC Energy has increased the distribution annually for more than 20 years. Investors who buy the stock at the current level can get a 7.1% dividend yield. TRP stock trades near $52 compared to $74 at one point in 2022, so there is decent upside potential in this name as well.
The bottom line on top TSX stocks for passive income
BCE and TC Energy pay attractive dividends that should continue to grow. If you have some cash to put to work in a TFSA focused on passive income, these stocks still look cheap and deserve to be on your radar.