Canadian savers are taking advantage of the market correction to buy top TSX dividend stocks at cheap prices for their self-directed RRSP focused on total returns.
Royal Bank
Royal Bank (TSX: RY)(NYSE: RY) generated net earnings of $16.1 billion in fiscal 2021 and is on track to top that performance in fiscal 2022.
The company made it through the pandemic in good shape largely due to government aid programs that supported businesses and households during the lockdowns. People and firms were able to make loan payments until the economy restarted, avoiding the wave of defaults the banks feared. As a result, Royal Bank now has a cash hoard it can deploy through acquisitions, share buybacks, and dividend increases.
The bank announced a $2.6 billion acquisition earlier this year that will expand the wealth management operations in the United Kingdom. It wouldn’t be a surprise to see a deal emerge in the United States after the steep decline in bank valuations in recent months. Royal Bank’s last large U.S. acquisition was the US$5 billion purchase of City National in 2015.
Royal Bank raised the dividend by 11% late last year and increased the payout by another 7% when the company announced the fiscal Q2 2022 results. Investors who buy the stock at the current price near $128 can pick up a 4% dividend yield. Royal Bank stock traded as high as $149 earlier this year, so there is decent upside opportunity on a rebound.
Long-term RRSP investors have done well with RY stock. A $10,000 investment in Royal Bank shares 25 years ago would be worth about $180,000 today with the dividends reinvested.
TC Energy
TC Energy (TSX: TRP)(NYSE: TRP) trades near $67 per share compared to the 2022 high around $74. The stock looks oversold at this level and offers investors a 5.4% yield with steady distribution growth on the way.
TC Energy is working through a $25 billion capital program that will help drive revenue and cash flow growth in the next few years. The core of the company’s $100 billion in assets is focused on natural gas transmission and storage. The global market for liquified natural gas (LNG) is expanding, as Europe searches for new supplies to replace its reliance on Russia and other countries look for reliable sources of the fuel for gas-fired power plants.
TC Energy has infrastructure in place in the United States that connects the strategic Marcellus and Utica shale gas plays to the U.S. Gulf coast where LNG facilities ship the fuel to overseas buyers. In Canada, TC Energy is building a new pipeline that will connect Canadian natural gas producers to a new LNG facility on the coast of British Columbia for shipment to buyers in Asia.
The bottom line on top TSX stocks to buy for total returns
Royal Bank and TC Energy are leaders in their respective industries. The companies provide essential services and generate growing revenue and higher earnings to support their dividends. Payout growth should continue in the coming years. The stocks appear undervalued right now and should be solid picks for a self-directed RRSP portfolio focused on long-term total returns.
