TFSA Passive Income: 2 High-Yield Stocks to Buy Before They Bounce

These top TSX dividend-growth stocks look cheap today and offer high yields.

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Retirees and other investors seeking reliable passive income have a chance to buy top TSX dividend stocks at discounted prices for a self-directed Tax-Free Savings Account (TFSA) focused on generating high yields and total returns.

Enbridge

Enbridge (TSX:ENB) is a giant in the North American energy infrastructure industry with a current market capitalization of $104 billion. The company moves 30% of the oil produced in Canada and the United States and 20% of the natural gas consumed by American homes and businesses.

ENB stock trades near $49 per share at the time of writing. This is off the 12-month nadir of around $43 but is still way below the $59 the stock reached two years ago.

Enbridge is working on a $25 billion secured capital program that will drive revenue and cash flow growth over the next several years. The company is also in the process of closing its US$14 billion acquisition of three natural gas utilities in the United States. The deals will make Enbridge the largest natural gas utility operator in North America. Natural gas demand is expected to grow in the coming years as power producers switch to fuel from coal and oil. Renewables, including solar and wind, have limitations. As such, reliable alternative power sources are required to meet rising electricity demand.

Enbridge has focused recent investments on utilities, export facilities, and renewable energy assets. The combination of these businesses with the core oil and natural gas pipeline infrastructure puts Enbridge in a good spot to capitalize on growth in domestic and international energy markets.

Management expects distributable cash flow (DCF) to grow by 3% through 2026 and by 5% after that timeframe. This should support ongoing dividend increases in the same range. The board raised the dividend by 3.1% for 2024 and has given investors an increase in each of the past 29 years.

Investors who buy ENB stock at the current level can get a 7.5% dividend yield.

BCE

BCE (TSX:BCE) trades for close to $46 at the time of writing compared to more than $60 a year ago and above $73 at the high reached in 2022. The steep decline over the past two years has been hard to watch for long-term holders of BCE shares who have historically owned the stock for its steady business and reliable dividend growth.

Rising interest rates are partly to blame, driving up borrowing costs and reducing cash available for distributions. BCE has also faced some revenue challenges in its media division. Advertisers are cutting back spending on television and radio promotions. This led BCE to sell or close dozens of radio stations last year. The company also trimmed its television programming. Over the past 12 months, BCE announced job cuts of about 6,000 positions to adjust to the current market conditions. Savings from the reduced employment expenses should start to show up in the 2025 results.

BCE faces some headwinds, but the company still expects 2024 revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to be similar to 2023 or slightly higher. Based on this outlook, the stock is probably oversold.

BCE raised the dividend by more than 3% for 2024. Investors who buy the stock at the current price can get a dividend yield of 8.6%.

The bottom line on top stocks for passive income

Hikes in interest rates are largely to blame for the pullbacks in the share prices of Enbridge and BCE. The two companies use debt to finance part of their capital programs, which reach billions of dollars every year. Economists broadly expect the Bank of Canada and the U.S. Federal Reserve to start cutting interest rates in the second half of 2024. Once that happens, these stocks could pick up a nice tailwind.

If you have some cash to put to work, ENB and BCE deserve to be on your radar right now for a portfolio focused on high-yield passive income.

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 Enbridge. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker owns shares of BCE and Enbridge.

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