Canadian investors are finally getting a chance to pick up some oversold TSX dividend stocks for their self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolios.
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BCE
BCE (TSX: BCE) completely missed the TSX rally that has carried a good chunk of the index’s members to record highs.
In fact, the stock has been a disaster for long-term holders who historically relied on BCE for its stable and generous dividend. BCE trades near $32 per share at the time of writing, not far off its multi-year low around $30 and way off the $74 it fetched in 2022.
Soaring interest rates in 2022 and 2023 triggered the initial plunge as BCE’s large debt load began to scare investors. Price wars in the Canadian mobile sector added to the pain, and the drastic drop in newcomers to Canada, particularly students, wiped out an important source of new customers for devices and data plans.
As the pressure mounted and the share price plunged, BCE sold its stake in Maple Leaf Sports and Entertainment (MLSE) and slashed the dividend by about 56% last year to preserve cash flow.
When the company then used the MLSE sale proceeds to buy an American fibre internet company instead of paying down debt, the market initially responded negatively. Since then, pundits have warmed up to the move as it provides BCE with decent growth opportunities that weren’t available in the Canadian market.
BCE is also reducing costs across the legacy business units to get expenses in line with revenue, especially in the media group. At the same time, it is investing in sovereign data centres to meet government and corporate demand to keep data in the country.
The turnaround efforts will take time to deliver results, but most of the bad news is probably already priced into the stock at this point, and the new dividend payment should be safe. Investors who buy BCE at the current price can get a dividend yield of 5.4%.
Enbridge
It has been a while since investors have had a chance to buy Enbridge (TSX: ENB) on a meaningful pullback, but that moment has finally arrived. The stock trades for close to $70 per share at the time of writing. That’s $10 lower than the price it fetched last month. Enbridge is still up handsomely from the $44 it traded at nearly three years ago, but investors who buy at the current price can get a solid 5.5% dividend yield.
Enbridge raised the distribution in each of the past 31 years. The glory days of 10% dividend hikes are long gone for the stock, largely because the company is now so large that it takes massive acquisitions or capital investments to move the earnings needle. Management is, however, steadily boosting distributable cash flow through a combination of strategic asset purchases and development projects. The current secured capital plan is about $41 billion.
Dividend growth has been in the 3% range for the past few years. That will likely continue, which is just fine in the current market conditions.
The bottom line
BCE and Enbridge offer investors attractive dividend yields at their current prices. If you have some cash to put to work, these stocks deserve to be on your radar.
