The stock market has staged an impressive recovery since late January, and many of the top stocks that were heavily oversold have now returned to fair value.
The lesson learned, of course, is that investors shouldn’t worry too much about short-term swings, especially when buying best-in-class dividend-growth stocks to put in an RRSP.
If you missed the buying opportunity, don’t worry. Another will certainly emerge. If your holdings fell during the pullback, you should be pleased because your dividends were able to buy more shares at a lower price.
For those investors with a bit of cash remaining in their RRSP accounts, there are still some good deals in the market.
Here are the reasons why I think TransCanada Corporation (TSX:TRP)(NYSE:TRP) and Shaw Communications Inc. (TSX:SJR.B)(NYSE:SJR) look attractive right now.
TransCanada had a rough 2015 as investors exited any name connected to the energy sector and President Obama rejected the company’s Keystone XL pipeline project.
While the Keystone decision is unfortunate, the project could very well come back to life if the Republicans win this year’s election, and that isn’t being priced into the stock.
Here in Canada, the company’s battle to get Energy East built is also keeping investors away, but I think that project will probably go ahead once all the stakeholders get their demands met.
In the meantime, TransCanada is rolling along quite nicely.
The company just signed a deal to purchase Texas-based Columbia Pipeline Group Inc., which gives TransCanada a leg up in the growing Marcellus and Utica shale gas plays. That deal adds a new revenue stream and sets the business up for further growth down the road.
TransCanada also has $13 billion in development projects on the go that will be completed and in service by 2018. As a result, shareholders should see dividend growth continue at a rate of 8-10% per year through 2020.
The stock currently offers a yield of 4.5%, so investors get paid well while they wait for better days in the energy patch.
Shaw is in the middle of a huge transition.
The company is in the process of buying Wind Mobile and just completed the sale of its media operations to Corus Entertainment Inc.
The media sale takes away content risk just as Canada moves to a pick-and-pay system for TV subscriptions, and the mobile addition will enable Shaw to compete on a level playing field with its peers.
The company has received $1.85 billion in cash and $800 million in shares for the media division. The money will be used to help pay for Shaw’s acquisition of Wind Mobile, which is expected to close later this year.
The company didn’t raise its dividend when it released the most recent quarterly report, but Shaw has a strong track record of boosting the payout. Once all the dust settles, investors should see the hikes resume.
The stock is trading at a big discount to its peers, and investors can now pick up a solid 4.75% yield. Eventually, I think the shares will regain their 12-month high, which is about 18% above the current price.