Got $1,000? I’d Buy These 2 Dividend Stocks Before the Next TSX Rally

The TSX has been ringing the record-high bell so often that someone may soon ask it to keep the noise down. Yet a record index doesn’t mean every stock has already joined the party. Some of the market’s most useful dividend payers are still standing near the snack table, waiting to be noticed.

Beyond banks

That difference is especially important now. Financial stocks represent 37% of the TSX, up from 31% in March, after the sector climbed 22% from February. Buying whatever already pushed the index higher could therefore leave an investor chasing expensive banks while overlooking the next group capable of moving.

Market rallies tend to rotate. One sector leads, valuations stretch, and money begins searching for a cheaper place to land. Dividends make that waiting period more pleasant, but the headline yield is only the appetizer. Investors examining Canadian dividend stocks should still check whether cash flow covers the payment and whether debt could swallow tomorrow’s income.

The rate backdrop could help the overlooked names. The Bank of Canada held its policy rate at 2.25% in July, well below its previous peak. If borrowing costs remain manageable and investors rotate toward rate-sensitive businesses, two beaten-up income stocks could finally receive an invitation.

T

TELUS (TSX: T) provides wireless, internet, healthcare technology, and digital services. Its shares recently traded roughly 42% below their 52-week high. That collapse wasn’t market shyness. TELUS stock cut its quarterly dividend by 55% in July after years of heavy spending and stubbornly high leverage.

The cut hurt, yet it also removed the question hanging over the stock. The new $0.19 quarterly dividend should save approximately $2.7 billion through 2028, with the cash directed toward debt reduction. Second-quarter free cash flow rose 2% to $545 million, while management aims to reduce net debt to adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) from 3.5 times to 3 times or less by the end of 2028.

At the new $0.75 annual payout, TELUS stock still yields approximately 5.6%. Investors aren’t buying a pristine dividend-growth story. They’re buying a turnaround where a smaller, better-supported payment could allow the balance sheet and eventually the share price to recover.

SRU

SmartCentres REIT (TSX: SRU.UN) offers a steadier companion. It owns 201 properties, many anchored by Walmart and other retailers Canadians visit whether the market is celebrating or sulking. Second-quarter occupancy reached 98.1%, while rents on renewed leases increased 6.6% including anchor tenants.

Funds from operations (FFO) reached $0.58 per unit during the quarter, covering the equivalent of $0.46 paid through three monthly distributions. The $1.85 annual distribution yields approximately 6.5% at writing. That gives investors immediate income plus exposure to lower financing costs, rising rents, and new retail developments. It also shows why monthly dividend stocks can be useful without pretending every monthly payment is magic.

Foolish takeaway

TELUS stock lowered its 2026 outlook, and another operating disappointment could keep the stock pinned down. SmartCentres faces higher interest costs, development risk, and an adjusted FFO payout ratio with less room than a conservative utility might offer. Neither payout is guaranteed, and neither stock must rally simply because the broader index does. Yet even today, here’s what just $1,000 could bring in divided between these stocks.

Still, the next leg of a TSX rally may not come from the same banks that powered the last one. TELUS stock now has a credible deleveraging plan, while SmartCentres continues collecting rent from nearly full properties. Reinvest those payments while both businesses improve and today’s overlooked income could become tomorrow’s far more popular trade.