TFSA Pension: 1 Great Canadian Dividend Stock to Own for Growing Passive Income

tfsa pension: 1 great canadian dividend stock to own for growing passive income

stock data

Canadian savers are searching for undervalued dividend stocks to buy for a self-directed Tax-Free Savings Account (TFSA) focused on growing distributions and long-term returns.

Let’s take a look at one discounted TSX dividend stock that started to move higher in recent weeks after an extended decline. More gains could be on the way.

BCE

BCE (TSX:BCE) is down more than 35% from the 2022 high. The stock currently trades near $46 per share compared to the 12-month low of around $44 and more than $60 at this time last year.

Canada’s largest communications firm is an anchor position in many retirement portfolios set up to pay high-yield dividends for passive income. The pullback has shocked long-term holders of BCE shares.

Rising interest rates are largely to blame for the decline in the share price over the past two years. The Bank of Canada raised rates aggressively in 2022 and 2023 as a means of cooling off an overheated economy to bring inflation under control. The strategy appears to be working. Canada’s inflation rate for April 2024 was 2.7%. That’s getting close to the 2% target and is much better than the 8% inflation recorded in June 2022.

High interest rates drive up borrowing costs for companies like BCE, which use debt to fund part of their large capital programs. BCE invests billions of dollars every year in wireline and wireless network upgrades. Higher debt expenses eat into profits and can reduce cash available for payouts to shareholders.

Economists widely expect the Bank of Canada to start cutting interest rates in the second half of 2024. Once the first rate cut occurs, BCE could see a rush of new money flow into the stock as income investors try to lock in the big dividend yield.

On the operational side, BCE’s media businesses are struggling with falling advertising revenue in the radio and television platforms. Customers are shifting marketing money to digital alternatives or are simply cutting back ad budgets to preserve cash. BCE announced job cuts of around 6,000 positions over the past year and sold or closed dozens of radio stations. The company also trimmed television programming to adjust to the changing market conditions. Expenses connected to the changes will impact 2024 results, but investors should see the financial situation improve next year.

Despite the headwinds, BCE still expects 2024 revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to be flat or slightly higher compared to 2023.

BCE raised the dividend by 3.1% for 2024. That’s smaller than the average 5% per year hike investors received in the previous 15 years, but the payout should be safe. Investors who buy BCE stock at the current level can get a dividend yield of 8.6%.

The bottom line on top stocks for TFSA passive income

Ongoing volatility should be expected until the Bank of Canada actually begins to cut interest rates. In addition, the broader stock market is due for a correction after its big rally in recent months. As such, BCE could very well slip back to the 12-month low, but the stock already looks cheap and you get paid well to ride out any additional turbulence.

If you have some cash to put to work, this stock deserves to be on your radar for a portfolio targeting passive income.

Should you invest $1,000 in BCE right now?

Before you buy stock in BCE, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the 10 best stocks for investors to buy now… and BCE wasn’t one of them. The 10 stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $18,271.97!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 32 percentage points since 2013*.

See the 10 stocks * Returns as of 5/21/24

More reading

    The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker owns shares of BCE.

    OTHER NEWS

    25 minutes ago

    Emma Raducanu turns down Olympics wild card – but Andy Murray in Team GB squad

    25 minutes ago

    Mathematician Reveals 'Equals' Has More Than One Meaning in Math

    26 minutes ago

    Candidates race into France's snap legislative poll but one convicted for spousal assault withdraws

    26 minutes ago

    Treasury Secretary Janet Yellen says use of Russian assets from Ukraine is not 'theft' despite Putin's claims

    26 minutes ago

    Maine police kill armed man after a night of gunfire and burned homes

    27 minutes ago

    How Apple, Microsoft and 3 other tech giants can make money with AI geared to consumers

    27 minutes ago

    Guy Haymes death: Why Jayson Brett Dal Molin didn't face court after being charged with murder of much-loved surfer on Sydney's northern beaches

    30 minutes ago

    ‘We Thank PM Modi’: Sharad Pawar’s Remark With Allies Stings BJP

    30 minutes ago

    Nick Jonas and Adrienne Warren to Star in ‘Last Five Years’ on Broadway

    32 minutes ago

    Celtics Fans Send Desperate Plea to Jayson Tatum Ahead of NBA Finals Game 5

    32 minutes ago

    Inside Finland’s first NATO mission with UK forces in show of strength to Putin

    32 minutes ago

    Las Vegas Raiders post-minicamp starting offense projection: Who's QB?

    32 minutes ago

    Six MAD Shorts heading to the Toronto Arab Film Festival

    32 minutes ago

    Kate Middleton's 'perfect' Father's Day photo of Prince William and their children sends royal fans into a frenzy as they say they're left in tears over sweet 'we love you, Papa!' message

    32 minutes ago

    Dozens of firefighters tackle raging inferno inside flat in London tower block - as four people are rushed to hospital

    32 minutes ago

    Biden slams the Supreme Court and rips into Trump at Jimmy Kimmel-hosted celebrity fundraiser attended by Obama, George Clooney and Julia Roberts

    32 minutes ago

    Eat more protein and less carbs if you want to lose weight and feel less hungry, new study suggests

    35 minutes ago

    'Dan Hurley just used and abused the Los Angeles Lakers.' — Skip on Hurley deciding to stay at UConn

    35 minutes ago

    Hamburg police shoot man with axe and ‘Molotov cocktail’ ahead of Euro 2024 game

    36 minutes ago

    Houston native making Hollywood dreams come true, and wants to bring some of it back to Space City

    36 minutes ago

    Scorching heat, rising humidity in Chicago's forecast Sunday, along with threat of storms

    37 minutes ago

    CBIC mounting multi-modal awareness against frauds in name of Customs

    37 minutes ago

    He's played 70 games for Ten Hag: Man Utd eye 42m Branthwaite rival

    37 minutes ago

    WNBA All-Star Fires Stern Message To Players Who Want Caitlin Clark To Fail

    37 minutes ago

    Jack Draper WINS his first ATP Tour title as new Brit No 1 comes from a set down to beat Matteo Berrettini in the Stuttgart Open final

    37 minutes ago

    Woman who spent 43 years in prison has conviction overturned as case takes shocking twist

    37 minutes ago

    Serbia vs England - Euro 2024: Live score, team news and updates as the Three Lions quest to 'Bring Football Home' gets underway against a Serbian team led by Mitrovic and Dusan Tadic

    42 minutes ago

    Data analyst reveals the state where gas prices are expected to increase to $10 per gallon

    42 minutes ago

    Video: Three Lions fans' booze-up kicks off ahead of England's Euros clash with Serbia TODAY - with new video showing supporters singing chorus of '10 German Bombers' in defiance of FA and police

    42 minutes ago

    Bec Judd reveals what REALLY happened to the red dress that launched her career at the 2004 Brownlow: 'It was definitely a moment'

    42 minutes ago

    Luis Diaz is caught by HORROR two-footed tackle in Colombia's friendly win against Bolivia as Liverpool fans fume over 'disgrace' as opposing defender isn't sent off

    43 minutes ago

    Levi Colwill 'is open to joining Bayern Munich' with new boss Vincent Kompany a keen admirer of the Chelsea defender

    43 minutes ago

    FBI agent and Twin Towers first responder reveal how likely another 9/11 attack is on U.S. soil...and why it will be even more deadly

    44 minutes ago

    Buck, Bajraktarevic spark Revolution to victory over Whitecaps

    44 minutes ago

    80 countries at Swiss conference agree territorial integrity of Ukraine must be basis of any peace

    44 minutes ago

    Haj 2024: 14 Jordanians dead, 17 missing in Saudi as authorities warn of high temperatures

    44 minutes ago

    BBC pundit convinced Levy will spend 60 million on Tottenham signing

    44 minutes ago

    Why bashing billionaires won’t solve the inequality crisis

    44 minutes ago

    Israel pauses military activity along southern Gaza road to facilitate aid

    44 minutes ago

    How England’s top private schools came to own 38,000 acres of land