The steep market pullback is finally giving self-directed RRSP investors a chance to pick up top TSX dividend stocks at undervalued prices. Buying stocks on a dip takes courage, but the long-term benefits can be significant for patient RRSP investors.
Manulife Financial
Manulife (TSX: MFC)(NYSE: MFC) trades near $22.50 per share at the time of writing compared to $28 earlier this year. At the current price, investors can pick up a solid 5.9% dividend yield and wait for the next dividend increase to boost the return oil the initial investment.
Manulife generated record profits in 2021, but the first quarter of 2022 came in below expectations due to the impacts of the Omicron surge. Manulife’s Canadian and American operations saw a jump in morbidity and mortality claims in the quarter and the Asia business took a hit from widespread lockdowns that resulted in lower sales. COVID-19 risks remain, but the biggest hits for Manulife should be in the rearview mirror.
Looking ahead, the Q2 2022 results might come in soft due to the correction in equity markets. This should also be a short-term issue. On the positive side, rising interest rates in Canada and the United States have the potential to significantly boost the returns Manulife generates on the cash its insurance operations need to set aside to cover potential claims.
Near-term volatility is expected, but Manulife stock looks cheap right now for a buy-and-hold portfolio. The board raised the dividend by 18% late last year, and another generous increase should be on the way for 2023.
Manulife is a good stock to buy if you are searching for a high-yield financial stock but don’t want the level of housing risk that comes with owning the big Canadian banks.
Enbridge
Enbridge (TSX: ENB)(NYSE: ENB) doesn’t produce oil or natural gas. It simply moves the commodities along its vast energy infrastructure network and charges a fee for providing the service. Changes in oil and natural gas prices have limited direct impacts on revenue and cash flow, so the recent drop in the share price that occurred alongside the pullback in commodity stocks appears overdone.
Enbridge trades near $54.50 per share at the time of writing compared to $59.50 earlier this month. The current dividend yield is an attractive 6.3%.
Enbridge raised the distribution in each the past 27 years. The board increased the payout by 3% for 2022. Ongoing annual hikes of 3-5% should be on the way supported by rising distributable cash flow. Enbridge is also buying back up to $1.5 billion in stock under the current share-repurchase program.
Enbridge has the balance sheet strength to make strategic acquisitions to drive growth. The company spent US$3 billion last year to buy an oil export terminal. Enbridge is also evaluating organic growth through the development of carbon capture and storage hubs.
The bottom line on top TSX dividend stocks to buy now
Manulife and Enbridge appear oversold at current prices and offer attractive dividends with high yields. Payout growth should continue at a steady pace, driven by rising revenue and profits. If you have some cash to put to work, these stocks deserve to be on your radar.
