Investing in beaten-down dividend stocks might seem like a solid strategy to lock in a high yield and begin a passive-income stream at a low cost. However, it is essential to look beyond a company’s high yield and analyze whether its dividend payouts are sustainable across business cycles.
In this article, I have identified two TSX dividend stocks, including Toronto-Dominion Bank (TSX:TD) and BCE (TSX:BCE), that offer shareholders a tasty dividend yield in 2025. So, let’s see which blue-chip TSX stock you should own right now.
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Is TD Bank stock undervalued in 2025?
TD Bank is among the largest companies in Canada and currently offers shareholders a forward yield of 4.9%. The TSX bank stock trades 23% below all-time highs, trailing the broader markets by a significant margin.
TD Bank is restructuring its balance sheet amid tariff concerns. Chief Executive Officer (CEO) Raymond Chun acknowledged that trade risks are “clouding the economic outlook” during the bank’s fiscal first quarter (Q1) of 2025 (ended in January) earnings call.
The Canadian banking giant reported Q1 earnings of $3.6 billion with earnings per share (EPS) of $2.02, as it achieved volume growth in Canadian Personal and Commercial Banking alongside strong trading income. TD’s common equity tier-one (CET1) ratio stands at 13.1%, with a pro forma ratio of approximately 14.2% following its Schwab stake sale and planned $8 billion share buyback.
Notably, TD Bank built $150 million in reserves last quarter and added another $149 million specifically for tariff-related risks in Q1. The bank also sold $19 billion in bonds as part of its restructuring, which is expected to generate net interest income (NII) benefits at the upper end of the previously communicated $300-500 million range.
However, TD warned that prolonged tariff uncertainty could impact consumer sentiment, business investment, and unemployment. Its expense growth hit 12% yearly, and Q2 is expected to show even higher increases before moderating in the second half.
Priced at 10 times forward earnings, TD stock trades at a cheap multiple. Analysts remain bullish and expect it to gain 8%, given consensus price target estimates. After accounting for its dividend yield, cumulative returns could be closer to 13%.
Is the TSX dividend stock a good buy?
Shares of BCE are down over 60% from all-time highs, raising its dividend yield to more than 11%. In Q4, BCE reported a revenue decline of 0.8% year over year to $6.42 billion, while adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) rose by 1.5% to $2.61 billion, indicating a margin of 40.6%.
For the full year 2024, BCE achieved its highest annual adjusted EBITDA margin in over 30 years, at 43.4%, despite a 1.1% revenue decline. However, its free cash flow stood at $2.89 billion, down 8.1% from 2023.
BCE’s 2025 guidance reflects continued challenges. In 2025, it projects revenue growth between -3% and 1% and adjusted EBITDA growth between -2 % and 2%. Adjusted EPS is expected to decline between 8% and 13%, while lower capital expenditures might help the telecom heavyweight improve its free cash flow by at least 11% in 2025.
CEO Mirko Bibic highlighted BCE’s strategic transformation initiatives, which have already achieved 50% of the targeted $1 billion in cost savings. Moreover, a focus on digital innovation remains a bright spot, with digital revenues growing 19% in 2024 to represent 42% of Bell Media’s revenue. Additionally, the acquisition of Ziply Fiber, expected to close in the second half of 2025, should accelerate BCE’s fibre strategy.
For investors, several risks loom: competitive pricing pressure in wireless and broadband services, continued high-interest expenses expected to reach $1.775-$1.825 billion in 2025, and higher depreciation costs. The company’s net debt leverage ratio of 3.8 times also remains a concern.
BCE maintained its $3.99 annualized dividend but implemented a 2% discounted dividend reinvestment plan to retain cash, reflecting a cautious capital-allocation approach.
While BCE offers a higher dividend yield, it continues to wrestle with high debt levels and narrowing margins, which might impact its dividend payout. Given these factors, TD Bank stock is a better buy than BCE in 2025.
