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For contrarian investors seeking high yields from solid TSX dividend stocks, now presents an opportunity to acquire leading Canadian dividend-growth names at discounted prices.
TC Energy (TSX:TRP)
TC Energy currently trades around $52.50, up from its 12-month low near $44 but still well below its peak of $74 in 2022, before interest rate hikes took effect in Canada and the United States.
The company has an extensive capital program aimed at driving revenue and cash flow growth in the years ahead. However, rising interest rates, resulting in higher borrowing costs, can impact profitability and render some projects financially unviable.
With the Bank of Canada and the U.S. Federal Reserve expected to commence interest rate cuts in 2024 to prevent economic recession, pipeline companies like TC Energy could benefit from renewed investor interest.
TC Energy is actively strengthening its balance sheet following cost overruns on a major project. Asset sales completed in 2023 and planned for 2024 are expected to raise over $8 billion, and the company intends to spin off its oil pipeline businesses to generate additional funds. These initiatives should position TC Energy to pursue its capital program effectively.
BCE (TSX:BCE)
BCE trades near $46, down from nearly $70 two years ago, primarily due to high interest rates. The company invests heavily in network upgrades, including the expansion of the 5G mobile network and fiber optic lines, funded partly through debt.
BCE's media group has experienced weaker ad revenue, and mobile pricing competition has intensified. To adapt, BCE announced staff reductions totaling approximately 6,000 positions over the past year. While this will impact 2024 results, expense savings should materialize in 2025.
Despite challenges, BCE expects revenue and adjusted EBITDA to be in line with or slightly higher than 2023. With a dividend increase of 3.1% for 2024, investors buying BCE stock at current levels can enjoy a dividend yield of 8.6%.
While ongoing volatility is anticipated until central banks commence rate cuts, TC Energy and BCE offer attractive dividends and growth potential. For portfolios focused on high-yield dividends, these stocks warrant consideration.
