TFSA Pension: 2 Great Canadian Dividend Stocks to Own for Total Returns

Top TSX dividend stocks now offer high yields.

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The Tax-Free Savings Account (TFSA) is becoming a popular option for building long-term investment portfolios that can provide a steady stream of tax-free passive income in retirement. A pullback in the share prices of several top Canadian dividend stocks is giving TSX investors an opportunity to buy dividend-growth stocks at discounted prices.


BCE (TSX:BCE) is Canada’s largest communications company, with a current market capitalization of nearly $42 billion. The stock trades for close to $47 at the time of writing. This is up from the 12-month low near $44 but is way off the $74 the stock fetched in the spring of 2022.

The meltdown has been both a surprise and difficult to watch for long-term dividend investors who have relied on BCE for its steady dividend growth and normally low volatility.

BCE has a wide moat in an industry that generates most of its revenue from essential internet and mobile communications services. Population growth in Canada helps support telecom product and services demand, and the relatively small number of competitors has typically enabled BCE and its peers to make the large investments required to cover a massive land base with a small population by international standards.

In the past two years, however, BCE has suffered from the steep rise in interest rates in Canada and a drop in ad revenue in its media business. High interest rates drive up borrowing costs. BCE uses debt to fund part of its large capital program, so a jump in debt expenses puts pressure on profits and cuts into the amount of cash that is available for distributions to shareholders.

BCE remains very profitable, but the company raised the dividend by just 3.1% for 2024 compared to the 5% average investors had received annually over the previous 15 years. Management announced payroll cuts of roughly 6,000 positions over the past 12 months to adjust the business to the current market conditions. Revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2024 are expected to be in line with or slightly higher than 2023, so the drop in the share price appears overdone, even as headwinds persist.

The 2025 results should show improvements as the impacts of the cost cuts in 2023 and 2024 emerge. Investors might not see a big stock price surge in the near term, but you get paid a solid dividend yield of 8.5% at the current share price to ride out any additional turbulence.

TC Energy

TC Energy (TSX:TRP) finally reached mechanical completion on its 670 km Coastal GasLink pipeline in late 2023. The project’s budget more than doubled to $14.5 billion from the original 2018 estimate, forcing TC Energy to unload non-core assets last year, and that process continues in 2024 to shore up the balance sheet. Management monetized $5.3 billion last year and is working towards selling another $3 billion in assets this year. In addition, the company intends to spin off the oil pipeline business to unlock shareholder value.

As with BCE, the jump in interest rates put extra pressure on TC Energy’s share price over the past two years. Economists broadly expect the Bank of Canada and the U.S. Federal Reserve to start cutting rates in the second half of 2024 and through 2025. Assuming they are correct, shareholder interest in TC Energy could surge over the coming 12 months.

The company delivered good financial results in 2023 and continues to move ahead on the capital program. As new assets are completed and go into service, TC Energy should see revenue and cash flow expand enough to support planned annual dividend increases of at least 3%.

TC Energy trades near $53 per share at the time of writing. That’s up from the 12-month low of around $44 but still down from more than $70 in June 2022. The board has increased the dividend annually for more than two decades. Investors who buy TRP stock at the current level can get a 7.25% dividend yield.

The bottom line on top TSX dividend stocks

BCE and TC Energy 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.

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 has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker owns shares of BCE.

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