These Great TSX Dividend Stocks Now Offer Amazing Yields

Investors who missed the rally off the 2020 market crash now have another opportunity to buy some top TSX dividend stocks at discounted prices for a self-directed portfolio focused on generating high-yield passive income.

Telus

Telus (TSX:T) has increased its dividend annually for more than 20 years. Investors who buy Telus stock at the current price can get a 7.7% dividend yield.

Telus trades for close to $20 per share at the time of writing. The stock hasn’t been this low since 2016, so investors need to be careful. That being said, the upside potential on a rebound is attractive. Telus traded as high as $34 in 2022 before the Bank of Canada aggressively raised interest rates through the bank half of that year and most of 2023.

High rates are largely to blame for the decline in the share price. Income investors might have shifted funds to Guaranteed Investment Certificates (GICs) that saw rates go as high as 6%. Telus also had to reduce guidance in 2023 due to revenue challenges at its Telus International subsidiary, which provides multi-lingual call centre and IT services to global companies.

Management reduced staff by about 6,000 positions in the past year in order to adjust to the current market conditions and to position the business to meet financial targets. Telus still delivered 7.6% growth in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2023 and expects adjusted EBITDA to rise by at least 5.5% in 2024.

The Bank of Canada just reduced its target interest rate by 0.25%. Additional interest rate cuts will further reduce borrowing costs. Telus uses debt to fund part of its capital program, so this should help the bottom line and could bring investors back to Telus next year as GIC rates slide. Based on the financial guidance, the stock looks oversold right now, and you get paid a good dividend to wait for the rebound.

TC Energy

TC Energy (TSX:TRP) trades for close to $52 per share at the time of writing. In June 2022, the stock was as high as $74.

As with Telus, the surge in interest rates through 2022 and 2023 drove up borrowing costs. TC Energy spends billions of dollars every year on capital projects that can take years to complete before they start to generate income. Rising debt costs eat into profits and reduce the cash that can be used for distributions.

TC Energy reached mechanical completion on its 670 km Coastal GasLink pipeline late last year. The final cost is expected to be in the range of $14.5 billion, which is more than double the initial budget the company announced in 2018. With the uncertainties on the project now in the rearview mirror the headwind it caused for the stock should ease.

Asset sales brought in $5.3 billion in 2023, and another $3 billion is expected in 2024. This will reduce the debt load and strengthen the balance sheet to pursue the rest of the capital program. TC Energy’s overall business performed well in 2023, and the capital program is expected to drive steady cash flow growth in the coming years.

TC Energy has increased the dividend annually for the past 24 years. Investors who buy the stock at the current level can get a 7.4% dividend yield.

The bottom line on top stocks for passive income

Near-term volatility should be expected, but Telus and TC Energy pay attractive dividends that should continue to grow. If you have some cash to put to work, these stocks look cheap right now and deserve to be on your radar.