Pensioners who are looking for ways to get better returns on their savings can take advantage of the pullback in the share prices of some of Canada’s best dividend stocks to generate high yields inside a self-directed Tax-Free Savings Account (TFSA) focused on generating growing passive income.
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TC Energy
TC Energy (TSX:TRP) increased its dividend in each of the past 24 years. The company’s share price fell from $74 in 2022 to as low as $44. TRP stock currently trades near $53 and more gains should be on the way.
TC Energy just announced a $7.15 billion bond sale to refinance loans it took to get its $14.5 billion Coastal GasLink project finished last year. The budget for the 670 km pipeline more than doubled from the initial estimates due to soaring material and labour costs and numerous delays, but the project finally reached mechanical completion last year and is expected to start generating revenue in 2025 when it begins moving natural gas from Canadian producers to a new liquified natural gas (LNG) export facility being built on the coast of British Columbia.
TC Energy raised $5.3 billion in cash through asset sales last year and is on track to bring in another $3 billion in 2024 to shore up the balance sheet. The company is also planning to spin off its oil pipelines business this year.
TC Energy’s ongoing capital investments will be about $8 billion in 2024 and $6 billion to $7 billion per year over the medium term. As new assets go into service, the resulting revenue boost should support ongoing dividend hikes.
Investors who buy TRP stock at the current level can get a dividend yield of 7.25%.
BCE
BCE (TSX:BCE) fell out of favour with investors in the past two years as high interest rates drove up borrowing costs that cut into profits and reduced cash available for distributions. At the same time, the media group faced a decline in advertising revenue while price wars emerged in the mobile segment.
Despite the headwinds, BCE continues to generate solid profits and management is taking aggressive steps to adjust expenses to ensure the business meets its financial targets. BCE announced staff cuts in the range of 6,000 positions over the past year. The company closed or sold dozens of radio stations and trimmed content across its television portfolio.
Guidance for 2024 indicates stable to slightly higher revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) compared to last year. Digital revenue is rising in the media group, and the division appears to be stabilizing.
Ongoing volatility should be expected, and regulatory uncertainty is always a concern, especially heading into the 2025 election. That being said, the stock is likely oversold at this point and offers a dividend yield of 8.9%.
BCE increased the dividend by 3.1% for 2024. Barring any major negative revenue event, the distribution should be safe. Falling interest rates and the impact of lower salary expenses should help provide a cash buffer in 2025.
The bottom line on top stocks for passive income
TC Energy and BCE pay attractive dividends that now offer high yields. If you have some cash to put to work in a TFSA targeting passive income, these stocks look cheap today and deserve to be on your radar.
