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The market correction this year is giving retirees a chance to buy great Canadian dividend stocks at low prices. Telecom stocks and energy infrastructure stocks now offer high yields and growing distributions with a shot at some nice capital gains when the market recovers.
BCE (TSX:BCE) is Canada’s largest communications company with a current market capitalization of $54 billion. The stock currently trades below $60 compared to a high of $74 reached earlier this year. Considering BCE’s recession-resistant revenue stream and the outlook for revenue growth driven by investments in new network infrastructure, the drop in the stock looks overdone.
BCE gets most of its revenue from internet and mobile services. Businesses and homeowners need these regardless of the state of the economy. The remainder of the revenue comes from advertising in the media businesses and device sales. Those are more susceptible to an economic downturn, as companies might reduce marketing budgets to preserve cash flow, and phone buyers could decide to keep old devices for longer.
BCE is investing $5 billion in 2022 on the extension of its fibre-to-the-premises program and continues to roll out the 5G mobile network. Running fibre optic lines right to the building of customers helps BCE protect its competitive moat while setting the business up for higher subscriber fees as people access more broadband. The 5G network also opens up opportunities for revenue growth.
BCE is on track to hit its 2022 financial guidance. Investors should see another dividend increase in the 5% range for 2023. At the time of writing, BCE stock provides a yield of 6.2%. This is attractive for investors seeking reliable passive income.
Enbridge (TSX:ENB) increased its dividend in each of the past 27 years. The annual payout growth isn’t as generous as it was in the golden days, but Enbridge is still expected to increase the distribution by 3-5% per year, supported by rising distributable cash flow.
Management has a $13 billion capital program in place and is making acquisitions to take advantage of new opportunities in the global energy market. Enbridge purchased a US$3 billion oil export platform last year to serve growing demand for American oil. In addition, Enbridge sees good potential in the liquified natural gas (LNG) segment. The company is building new pipeline infrastructure in the United States to transport natural gas to LNG sites. Enbridge is also taking a 30% stake in the new $5.1 billion Woodfibre LNG facility being built in British Columbia.
The rebound in the energy sector is expected to remain robust in the coming years, as domestic and international fuel demand recovers. Airlines are ramping up capacity to meet the rebound in global travel and companies are calling workers back to the office.
Enbridge stock looks undervalued at the current share price near $51. The shares traded above $59 in June. Investors can now get a 6.7% yield.
The bottom line on top stocks to buy for passive income
BCE and Enbridge pay attractive dividends that should continue to grow at a steady pace. If you have some cash to put to work in a TFSA focused on passive income, these stocks look undervalued right now and deserve to be on your radar.