TFSA Investors: 1 Cheap Dividend Stock That Could Soar in 2025

This dividend-growth stock now trades at a discounted price and offers a 7% yield.

| More on:
Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept

Image source: Getty Images

The pullback in the share prices of several top TSX dividend stocks over the past two years is giving retirees and other investors seeking high-yield passive income a chance to buy great dividend-growth stocks at discounted prices for a self-directed Tax-Free Savings Account (TFSA).

TC Energy

TC Energy (TSX:TRP) had a rough ride in the second half of 2022 and through much of 2023. The stock fell from $74 in June 2022 to as low as $44 last year. Bargain hunters started buying in the fourth quarter (Q4), and TRP stock was actually as high as $55 in March 2024. At the time of writing, the latest dip has pulled the stock below $52.

The decline in the share price is largely due to higher interest rates in Canada and the United States. Soaring inflation forced the Bank of Canada and the U.S. Federal Reserve to raise interest rates aggressively to cool down the hot post-pandemic economy and get the labour market back into balance. TC Energy has a lot of debt, so higher borrowing costs can hurt profits and cut into cash positions. The company borrows money as part of its financing strategy to fund growth projects.

Pipelines and other energy infrastructure developments often cost billions of dollars and can take years to complete before they start generating revenue. This was the case with TC Energy’s 670 km Coastal GasLink pipeline, which reached mechanical completion last year at an estimated final cost of about $14.5 billion, more than double the original budget.

Opportunity

Economists broadly expect the central banks to start cutting interest rates in the second half of 2024 and continue to lower rates through 2025 to avoid pushing the economy into a recession. Once that process begins, TRP stock could pick up a new tailwind.

On the operational side, management sold interests in some American assets in 2023 to raise $5.3 billion to shore up the balance sheet. Additional asset sales of $3 billion are anticipated in 2024, and the company is working towards a spinoff of its oil pipeline business to unlock more value. These efforts will help set the company up to pursue the rest of the capital program, which is expected to average $6 billion to $7 billion per year starting in 2025.

Dividends

TC Energy actually delivered solid financial results in 2023 and the board raised the dividend by more than 3% for 2024. Investors who buy the stock at the current level can get a 7.4% dividend yield. TC Energy has increased the payout for 24 consecutive years and ongoing hikes in the 3% range are likely over the medium term as new assets go into service to drive cash flow growth.

Should you buy now?

Volatility is expected to continue until the central banks start cutting interest rates. However, TC Energy already looks cheap, and you get paid a good yield to ride out additional turbulence. If you have some cash to put to work in a portfolio targeting passive income, this stock deserves 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 has no position in any stock mentioned.

More on Dividend Stocks

A worker drinks out of a mug in an office.
Dividend Stocks

1 Dividend Stock to Buy if the Bank of Canada Keeps Cutting Rates 

This dividend stock is sure to benefit from ongoing cuts in the key interest rate and is already seeing some…

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

How Much Cash Do You Need to Quit Work and Live Off Dividend Income

Toronto-Dominion Bank (TSX:TD) pays a lot of dividend income. Can you live off of it in retirement?

Read more »

An analyst uses a computer and dashboard for data business analysis and Data Management System with KPI and metrics connected to the database for technology finance, operations, sales, marketing, and artificial intelligence.
Dividend Stocks

Invest $10,000 in This Dividend Stock for $1,398.40 in Passive Income 

This dividend stock offers a whopping 11.9% dividend yield right now, with returns that should fly high for this cyclical…

Read more »

Person holds banknotes of Canadian dollars
Dividend Stocks

This 6.1 Percent Dividend Stock Is My Pick for Instant Income

Here’s what makes Transcontinental one of my top dividend stock picks right now for instant income.

Read more »

Pile of Canadian dollar bills in various denominations
Dividend Stocks

For a Shot at $5,000/Year in Passive Income, Buy 1,000 Shares of This TSX Stock

Do you know you can build passive income with TSX stocks? A $22,000 investment can give you a shot at…

Read more »

Paper Canadian currency of various denominations
Dividend Stocks

Beat the TSX With This Cash-Gushing Dividend Stock

A new Canoe EIT Income Fund (TSX:EIT.UN) investment could earn almost 9% yield annually, and the monthly dividend stock has…

Read more »

RRSP (Registered Retirement Savings Plan) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

RRSP Wealth: 2 Great Dividend Stocks to Own for Total Returns

Dividend stocks like Fortis Inc (TSX:FTS) can be great additions to a well-diversified portfolio.

Read more »

edit Sale sign, value, discount
Dividend Stocks

3 Cheap Stocks to Add to Your TFSA Before They Get Expensive

The stock market has some lucrative TFSA stocks trading at multi-year lows. Now is a good time to buy these…

Read more »