Falling interest rates are driving income investors back to dividend stocks as rates offered on Guaranteed Investment Certificates (GICs) decline. Investors who missed the bounce are wondering which TSX dividend stocks are still attractive for a self-directed portfolio focused on yield and total returns.
Bank of Nova Scotia
Bank of Nova Scotia (TSX: BNS) trades near $68 per share at the time of writing compared to $93 at the high point in early 2022.
The bank recently regained its spot as the third-largest Canadian bank based on market capitalization. Bank of Nova Scotia continued to set aside higher provisions for credit losses (PCL) in the fiscal third quarter (Q3) of 2024 due to the impact of high interest rates on its customers who are carrying too much debt. The recent string of rate cuts in Canada, however, should lead to PCL stabilization in the next few months and reductions next year.
As long as there isn’t a big spike in unemployment due to a recession, the worst should be over for the bank on its provisions for bad loans.
Looking ahead, Bank of Nova Scotia’s new chief executive officer is taking the growth strategy in a new direction. The bank recently invested US$2.8 billion to acquire a 14.9% stake in KeyCorp, an American regional bank. This is in line with the plan to direct more capital to opportunities in Canada, the United States, and Mexico compared to Peru, Chile, and Colombia, where the bank made big bets over the past 20 years.
Investors who buy BNS stock at the current level can get a dividend yield of 6.2%.
Enbridge
Enbridge (TSX: ENB) is a giant in the North American energy infrastructure industry with a current market capitalization of nearly $120 billion. The company’s oil pipelines carry about 30% of the oil produced in Canada and the United States. Enbridge’s natural gas transmission network moves 20% of the natural gas used by American homes and businesses.
Getting large new pipeline projects approved and built is difficult these days, so Enbridge has shifted its growth investments in recent years to focus on renewable energy, exports, and natural gas utilities. The company is wrapping up its US$14 billion purchase of three natural gas utilities in the United States and has a $24 billion secured capital program. Management expects revenue from the new assets to help boost distributable cash flow by 3% per year through 2026. This should support steady dividend increases in the same range.
Enbridge raised the dividend in each of the past 29 years. Investors who buy the stock at the current level can get a dividend yield of 6.7%.
The bottom line on top dividend stocks
Bank of Nova Scotia and Enbridge pay attractive dividends that should continue to grow. If you have some cash to put to work, these stocks deserve to be on your radar.
