3 Safe Dividend Stocks to Beat Inflation

These top TSX dividend stocks now offer high yields.

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Retirees and other investors focused on passive income are searching for high-yield dividend stocks that can provide returns that at least keep them ahead of the rate of inflation. The pullback in the share prices of several top TSX dividend-growth stocks is giving investors an opportunity to get some good deals to help achieve this goal.

January 2024 inflation came in at 2.9%, so these stocks provide yields today that are more than double the current rate of inflation.

Enbridge

Enbridge (TSX:ENB) is a giant in the North American energy infrastructure sector with a current market capitalization near $100 billion. The stock trades for close to $46.50 at the time of writing compared to $59 at one point in 2022.

Rising interest rates in Canada and the United States are largely to blame for the pullback. Enbridge uses debt to finance part of its growth program, so higher borrowing costs can put a dent in profits and reduce cash available for distributions.

Markets expect the central banks to start cutting interest rates at some point in 2024. When that occurs, Enbridge could pick up a new tailwind. The company delivered solid results in 2023 that met guidance. Management expects distributable cash flow to grow by about 3% this year.

The board raised the dividend by 3.1% for 2024. That’s the 29th consecutive annual dividend increase from the company. Investors who buy the stock at the current level can get a 7.9% dividend yield.

Bank of Nova Scotia

Bank of Nova Scotia (TSX:BNS) raised its dividend for 2024 and now offers a yield of 6.7%. The stock trades for close to $63.50 at the time of writing. It was $93 roughly two years ago at the top of the rally that occurred after the 2020 market crash.

High interest rates are to blame in this case as well. Investors have become concerned that the steep jump in borrowing costs over such a short period of time will drive up bankruptcies and trigger a wave of loan defaults. Bank of Nova Scotia increased its provision for credit losses in 2023, and the trend is expected to continue this year, but the overall loan book remains in good shape, and Bank of Nova Scotia is still very profitable. Management expects earnings to be slightly better in 2024 than last year.

Even if the economy goes into a significant downturn, the bank has a solid capital cushion to ride out the turbulence. Investors can currently get a 6.7% dividend yield from BNS stock.

Telus

Telus (TSX:T) is another top TSX dividend stock that appears oversold. The company generated significant free cash flow growth in 2023 and expects to do the same again in 2024. Telus gets most of its revenue from mobile and internet communications subscriptions, so the stock should be good to own during a recession, as these services are required by homes and businesses regardless of the state of the economy.

Telus trades near $24 per share at the time of writing. It was $34 at one point in 2022. Investors can now get a 6.3% yield from the stock. Telus has increased the payout annually for more than two decades.

The bottom line on top dividend stocks

Enbridge, Bank of Nova Scotia, and Telus pay attractive dividends that should continue to grow. If you have some cash to put to work in a portfolio focused on passive income, these stocks 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, Enbridge, and TELUS. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker owns shares of Enbridge.

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