The pullback in the TSX Index is giving self-directed RRSP investors an opportunity to buy some of Canada’s top dividend stocks at undervalued prices. One popular RRSP investing strategy involves buying stocks with growing dividends and using the payouts to acquire new shares. The power of compounding that occurs over time can turn a small initial investment into a significant retirement fund.
Enbridge
Enbridge (TSX: ENB)(NYSE: ENB) is a giant in the North American energy infrastructure industry with significant networks of oil and natural gas pipelines that move 30% of the oil produced in Canada and the United States and 20% of the natural gas used by American homes and businesses.
Enbridge also has natural gas utilities and renewable energy assets to balance out the revenue stream. The odds of getting a major new oil pipeline approved and built are pretty slim these days, but Enbridge has strong development plans across other segments and acquisition opportunities to keep driving revenue and profit growth.
The company is evaluating carbon capture and storage hubs that will leverage its expertise. Enbridge is also taking advantage of the rise in international demand for Canadian and U.S. oil and natural gas. Enbridge purchased a strategic oil export terminal in Texas late last year and recently announced plans to build two new natural gas pipelines to feed liquified natural gas (LNG) sites on the Gulf Coast.
Europe is searching for reliable new LNG sources to replace supplies from Russia, while countries around the globe are switching form oil and coal to natural gas to produce electricity.
Enbridge stock trades near $53.50 at the time of writing compared to more than $59.50 earlier this month. The stock appears oversold and now provides a 6.4% dividend yield.
Telus
Telus (TSX: T)(NYSE: TU) just announced plans to buy LifeWorks for $2.3 billion in a deal that will significantly expand the size of Telus Health, which is already a leading player in the Canadian market for digital health services catering to doctors, hospitals, insurance companies, and employer-provided health plans.
The subsidiary ran under the radar of investors until the arrival of the pandemic. Telus Health is now on a strong growth path and could become a significant contribution to revenue in the coming years.
Telus still generates most of the revenue and its profits from the traditional communications businesses. Telus provides mobile, internet, security, and TV subscription services to homes and businesses across the country. The company is wrapping up its copper-to-fibre wireline transition and continues to expand its 5G network. These investments should open up new revenue streams and drive profit growth.
Telus expects to raise the dividend by 7-10% annually over the medium term. This is good guidance in an uncertain economic time when rising interest rates designed to reduce inflation risk triggering a recession.
Telus stock is down to $28.80 at the time of writing from the 2022 high above $34.50. Investors who buy the shares at the current level can pick up a solid 4.7% dividend yield and wait for the coming dividend hikes to boost the return.
The bottom line on top stocks to buy for RRSP total returns
Enbridge and Telus are top TSX dividend stocks that offer above-average yields and growing payouts. If you have some cash to put to work in a self-directed RRSP focused on total returns, these stocks deserve to be on your radar.
