Dividend Aristocrats on Sale: 2 TSX Blue Chips With Upside

TD Bank (TSX:TD)(NYSE:TD) is just one of two Canadian Dividend Aristocrats that could skyrocket into the mesosphere over the next year.

| More on:
Golden crown on a red velvet background

Image source: Getty Images

Dividend Aristocrats seldom go on sale in an otherwise expensive market, where the bluest of blue chips shine brightest. But when they do, Canadian investors had better be ready to do some buying, because the odds are not in favour of the bears, at least as far as the long term is concerned.

In this piece, we’ll have a look at two Dividend Aristocrats that I think are tumbling on near-term noise. For those with 10-year investment horizons, each name is a great buy while it lags the broader TSX Index going into the fourth quarter.

CN Rail: A Dividend Aristocrat that’s down 10%

CN Rail (TSX:CNR)(NYSE:CNI) has been heavily outpaced by the TSX this year, thanks in part to its bidding war for the right to scoop up the assets of U.S. railway Kansas City Southern. Investors aren’t a fan of the price. And at these levels, investors may be pricing in a slight chance of an even higher price if CP Rail were to up its bid further.

As of right now, CP Rail looks to be reluctant to sweeten up the pot by too much. It’s hungry for the assets that would crown the first network to span Canada, the U.S. and Mexico. But management appears confident that regulators will stay on its side and allow it to get a better deal without having to loosen up the purse strings to exceed CN Rail’s steep US$34 billion offer.

Nobody knows how the bidding war will unfold. But I think CN Rail is a bargain whatever happens. I think CP will ultimately walk away as winner of KSU, and CN Rail stock could find itself back to its all-time highs, as chances of the pricey deal fade.

Now off just shy of 10%, CN Rail has already corrected, offering correction seekers a chance to back up the truck, even as the broader markets continue hitting new all-time highs. With a wide moat and exceptional managers running the show, I think that any dip is worth at least nibbling on. The Dividend Aristocrat, which yields 1.83%, will keep hiking its dividend, regardless of what ends up happening with KSU.

TD Bank: A relative laggard that could soar

TD Bank (TSX:TD)(NYSE:TD) plunged 8% in the summer, as the relief rally ran out of steam. Although the stock has since recovered most of the ground lost in the semi-correction, I still think TD Bank represents one of the better Dividend Aristocrat bargains in the markets today.

In a prior piece, I’d summarized catalysts that were likely to propel TD stock to much higher levels. Although the improved environment bodes well for all banks, I think TD looks by far the cheapest, with shares trading at just north of 11 times trailing earnings.

Year to date, TD stock is up 20%, pretty much in line with the TSX. Meanwhile, many of its peers, most notably CIBC, are up by way more (CIBC is up over 38% YTD!). Although still beating the market, TD is a relative laggard, and it really doesn’t deserve to be, given it has some of the best managers out there.

As big bank dividend hikes get the green light again, I’d look for TD to deliver a very generous hike that could lure investors that sold in the depths of March and April 2020 right back into the name. TD is a Dividend Aristocrat, and the fundamentals are still as sound as ever, despite the relative discount on shares.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette owns shares of Canadian National Railway and TORONTO-DOMINION BANK. The Motley Fool recommends Canadian National Railway.

More on Dividend Stocks

Woman has an idea
Dividend Stocks

3 No-Brainer Best Dividend Stocks in Canada to Buy With $500 Right Now

Are you craving more cash flow? $500 in one of these best dividend stocks in Canada might deliver a slice…

Read more »

Canadian energy stocks are rising with oil prices
Dividend Stocks

5 Stocks Whose Dividends Just Keep Growing

Stocks like Enbridge and Fortis are growing their dividends for decades, and returning higher cash to their shareholders.

Read more »

Dividend Stocks

2 Stocks I’m Loading Up On in 2024

Restaurant Brands International (TSX:QSR) and another stock I'm pretty close to buying right here, right now.

Read more »

protect, safe, trust
Dividend Stocks

RRSP Investors: 2 Superior Dividend Stocks for Optimal Returns

Superior dividend stocks like the Canadian National Railway (TSX:CNR) can add income power to your portfolio.

Read more »

Increasing yield
Dividend Stocks

TFSA Passive Income: 2 High-Yield Stocks to Buy Before They Bounce

These top TSX dividend-growth stocks look cheap today and offer high yields.

Read more »

Portrait of woman having fun in the street.
Dividend Stocks

Why I Can’t Stop Buying Shares of This Magnificent High-Yield Dividend Stock in My TFSA

This dividend stock continues to be a top winner, even with returns falling the last few years. We're nearing some…

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Investors: 1 Cheap Dividend Stock That Could Soar in 2025

This dividend-growth stock now trades at a discounted price and offers a 7% yield.

Read more »

Hand writing Time for Action concept with red marker on transparent wipe board.
Dividend Stocks

1 Dividend Stock Down 13% to Buy Right Now

Are you looking for a buy-the-dip opportunity? This dividend stock is down 13% and is a buy right now before…

Read more »