The Financial institution of Canada’s September rate of interest minimize to 2.5% was well-received by the market, as decrease charges are good for shares generally. However decrease charges usually enhance some shares greater than others. That is what I’d wish to discover on this article right this moment.

Listed below are three TSX dividend shares that I feel ought to profit from decrease rates of interest, and that I’m particularly bullish on.

Why did the Financial institution of Canada decrease charges?

I’d like to start out off by reviewing the macroeconomic setting that introduced us right here. The financial shutdown of 2020 in the course of the pandemic drove the Financial institution of Canada to decrease its price to 0.25%, the place it stayed till February 2022. This helped rescue the economic system from a catastrophe, however inflation grew to become an enormous concern quickly after. Thus, the Financial institution of Canada subsequently raised the speed again as much as latest highs of 5% in July of 2023.

As of Could 2024, the easing cycle started once more as fears of an financial slowdown took maintain. As we speak, right here we’re at 2.5%, with the Financial institution of Canada issuing some alarms in regards to the economic system. The economic system is weakening, the labour market is softening, and geopolitical tensions stay. All of this factored into the choice to decrease rates of interest.

Let’s check out the three TSX dividend shares that ought to profit enormously from falling rates of interest.

BCE

BCE Inc. (TSX:BCE) is one in every of Canada’s main telecom corporations. It’s additionally one in every of Canada’s largest disappointments of latest years. As you understand, this as soon as untouchable telecom big truly bought right into a scenario that compelled it to chop its dividend, one thing unimaginable just some years in the past.

As we speak, the corporate has taken many steps to show issues round. This has included shedding a few of its workers, divesting of non-core companies, and customarily streamlining and enhancing efficiencies. The proceeds from these efforts have gone to paying down debt.

But, BCE continues to be extremely leveraged, with $32 billion in whole long-term debt and a debt-to-total capitalization ratio of 67%. With decrease rates of interest, the curiosity funds that include this debt will fall, leaving extra money for BCE to take a position again into the enterprise and return to its shareholders.

Northwest Healthcare Properties REIT

Actual property funding trusts are one other group of corporations that stand to learn from declining rates of interest. Northwest Healthcare Properties REIT (TSX:NWH.UN) is one other firm that bought into bother resulting from excessive debt ranges. When rates of interest rose, it too needed to slash its dividend.

As we speak, Northwest has additionally taken steps to promote non-core properties and lift the effectivity of the group. This has been rewarding, and Northwest is in a lot better form right this moment than it was again in 2023.

But, Northwest additionally stays extremely leveraged, with $2 billion in long-term debt and a debt-to-total market capitalization ratio of 53%. Because of this falling rates of interest and the ensuing decrease price of borrowing will profit Northwest’s financials enormously.

Fortis

The utility trade is one other capital-intensive trade that advantages from falling rates of interest. Though Fortis Inc. (TSX:FTS) has not gotten into bother resulting from its stability sheet, it’s additionally carrying a whole lot of debt – $31 billion in long-term debt and a debt-to-total capitalization ratio of 57%.

Fortis’ enterprise is extremely predictable, and it generates steadily rising earnings and money flows. I like this inventory as a result of it’s one other defensive one that may shelter our portfolios from financial weak spot and volatility.

The underside line

I’ve highlighted three TSX dividend shares right here that stand to learn from decrease rates of interest resulting from their closely indebted stability sheets and their capital-intensive companies. However they’re additionally enticing due to the defensive nature of their companies, which is an actual constructive given the financial troubles brewing.