Falling stock prices can be tough for investors to stomach. However, there are opportunities hidden within these challenges. Here are two magnificent dividend stocks on the Toronto Stock Exchange (TSX) that have fallen by over 22%, offering investors an attractive opportunity to buy and hold for the long term.
TD Bank: A dividend giant with recovery potential
Toronto-Dominion Bank (TSX:TD) has faced its share of struggles over the last few years. Yesterday, after releasing its earnings report, the Canadian bank stock saw its stock drop by another 7%. With uncertainty hanging over the bank, investors are understandably cautious. TD’s recent US$3.09 billion anti-money-laundering settlement in the United States and its subsequent strategic review have raised concerns about its growth outlook. Additionally, the current chief executive officer departing and the announcement of an internal successor (the current chief operating officer) have added to the instability.
Despite these challenges and changes, TD has continued to grow its dividend. The bank raised its payout by 2.9% yesterday, now providing a 5.7% yield. Currently trading at approximately $74 per share, this marks a 22% drop from its 2021 peak of around $95. Historically, TD’s dividend yield has reached as high as 6%, and even at its current rate, it remains a strong candidate for long-term investors.
Though 2025 may bring further turbulence due to leadership transitions and the ongoing strategic review, there’s clear value in the heightened dividend income that TD provides. Investors can lock in this high yield now and potentially benefit significantly when the stock rebounds.
TELUS: A telecom giant with a big dividend
TELUS (TSX:T) is another blue-chip stock that has underperformed in recent years. Like many large telecoms, TELUS reached its peak in 2022, just before the Bank of Canada began raising interest rates. While rates have cooled somewhat, TELUS faces additional challenges in the form of heightened competition from new entrants in the market.
Even with these headwinds, TELUS has consistently increased its dividend payout. The company raised its quarterly dividend by 3.4% to $0.4023 per share last month, marking a year-over-year increase of 7%. Currently, at about $22 per share — down 26% from its 2022 high — TELUS offers an impressive 7.3% dividend yield.
This consistent dividend growth, with plans to increase payouts by 7-10% annually through 2025, adds an extra layer of security for investors. The stock’s current price offers a reasonable entry point, with analysts projecting a 9-10% upside over the next 12 months. So, not only do investors enjoy a lucrative yield, but they also have the potential for price appreciation as the market recovers.
Why buy and hold?
Both TD and TELUS have weathered storms before, and their long histories of dividend growth make them compelling choices for income-seeking investors. While they are currently down over 22%, their big dividend yields — TD’s 5.7% and TELUS’s 7.3% — provide a solid foundation for returns. As the stocks stabilize and the companies navigate their respective challenges, there’s potential for both consistent income and capital appreciation.
These TSX dividend stocks are out of favour now, but with a long-term view, they could turn out to be magnificent stocks five years down the road.
