TD (TSX:TD) trades for less than $86 per share at the time of writing compared to $109 at the peak in early 2022. The meltdown in the prices of bank stocks over the past few months appears overdone, and investors can now pick up a solid 4% yield and look forward to some decent total returns once the market recovers.
TD raised the dividend by 13% for fiscal 2022. Investors should see another generous increase for next year, even amid the current economic headwinds. TD increased the distribution by a compound annual rate of about 11% since 1995. This makes TD one of the best dividend-growth stocks in the TSX Index.
TD is betting big on the American economy with two strategic acquisitions. The bank is buying First Horizon, a retail bank, for US$13.4 billion. The deal will make TD a top-six bank in the American market. TD is also expanding its capital markets capabilities with its US$1.3 billion takeover of Cowen, an investment bank.
Buying TD on large pullbacks has been historically proven to be a savvy move.
TC Energy (TSX:TRP) isn’t an oil and natural gas producer. The company simply moves the commodities from the production sites to storage facilities, refineries, liquified natural gas plants, or utilities and charges a fee for providing the service. This means volatility in oil and natural gas prices has limited directed impact on revenue and cash flow.
TC Energy’s core operations focus on the transmission and storage of natural gas. The fuel emits much less carbon dioxide when burned, making natural gas a better option than coal and oil for generating electricity. Demand for North American natural gas is rising, and TC Energy has the infrastructure in place or under construction to benefit from the anticipated surge in shipments of liquified natural gas to international buyers.
TRP stock trades near $57.50 per share at the time of writing compared to $74 in June. The drop appears overdone, and investors can now get a 6.25% dividend yield.
Suncor (TSX:SU) trades for $44 per share at the time of writing. This is about where the stock sat before the pandemic. Fuel demand has rebounded to 2019 levels, and the price of oil is currently US$86 per barrel compared to US$60 in early 2020. At today’s oil price, Suncor stock looks undervalued.
The company had a rough run during the pandemic. Management slashed the dividend by 50% when other major oil producers held their payouts steady. Since then, Suncor has raised the distribution back above the previous level, and more gains should be on the way. Suncor is paying down debt at a meaningful pace and this should free up more cash for distributions in the coming quarters. New management is selling non-core assets to unlock value. This could lead to generous bonus dividends and provide a tailwind for the share price.
Investors can now get a solid 4.25% dividend yield from SU stock.
The bottom line on oversold stock to buy now
TD, TC Energy, and Suncor all pay attractive dividends that should continue to grow. The stocks look oversold today and deserve to be on your radar for a buy-and-hold TFSA or RRSP portfolio.