The recent pullback in the TSX is giving dividend investors a chance to buy great Canadian dividend-growth stocks at discounted prices for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio.
Telus
Telus (TSX:T) trades near $21.50 per share at the time of writing compared to more than $34 at the peak in 2022.
The stock’s decline is largely due to rising interest rates in Canada over the past two years. The Bank of Canada raised rates to try to get inflation under control. Telus uses debt to fund part of its investments in network upgrades that include expanding the 5G network and running fibre optic lines to customers. Higher borrowing costs put a dent in profits and can cut into cash that is available for distributions to shareholders.
Last year, Telus cut 6,000 positions to adjust to changing market conditions, including challenges at its Telus International subsidiary that provides multi-lingual call centre and IT services to international companies.
Despite the headwinds, Telus still delivered good growth in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2023. The outlook for 2024 remains solid, and the reduced expenses due to the lower staff count should help deliver adjusted EBITDA growth of 5.5% to 7.5% this year.
Telus has increased the dividend annually for more than two decades. Investors who buy the stock at the current level can get a yield near 7%.
TC Energy
TC Energy (TSX:TRP) is a major energy infrastructure player with natural gas pipelines, natural gas storage, oil pipelines and power-generation facilities in Canada, the United States, and Mexico. The company intends to spin off the oil pipelines business this year to raise cash and unlock value for shareholders. The move is a continuation of the sale of non-core assets that began last year as management works to strengthen the balance sheet after the Coastal GasLink pipeline project went way over budget.
With Coastal GasLink now mechanically complete, the company is focused on the rest of the growth program. TC Energy expects to invest $8.5 to $9.0 billion on projects this year. The overall business delivered strong financial results in 2023, and management expects 2024 comparable EBITDA to be slightly higher.
The board raised the dividend by 3.2% for 2024. Investors can currently get a 7.9% yield from TRP stock. TC Energy trades near $48.50 at the time of writing compared to $74 at one point in 2022, so there is decent upside potential.
BCE
BCE (TSX:BCE) is the largest Canadian communications company, with a current market capitalization of about $40 billion. The stock trades below $44.50 at the time of writing, compared to more than $70 two years ago.
High interest rates are largely to blame for most of the pain, although BCE is also seeing declining revenue in its media division as advertisers are spending less on radio and television ads. Regulatory uncertainty has also been a factor in the decline of the share prices of both Telus and BCE.
Near-term headwinds are expected, but BCE expects to deliver 2024 financial results that are in line with last year. The board increased the dividend by 3.1% for 2024, and investors can now get a 9% yield from BCE stock.
The bottom line on high-yield dividend stocks
Telus, TC Energy, and BCE all pay attractive dividends. If you have some cash to put to work in a portfolio focused on dividends, these stocks look cheap today and deserve to be on your radar.
