The market correction is giving self-directed Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP) investors an opportunity to buy top TSX dividend stocks at cheap prices for diversified portfolios targeting long-term total returns. One popular strategy for building retirement wealth involves buying quality dividend stocks and using the distributions to acquire new shares.
Royal Bank
Royal Bank (TSX:RY) trades near $130 per share at the time of writing compared to $149 earlier this year. The drop appears overdone, considering the solid earnings results through the first three quarters of fiscal 2022 and Royal Bank’s solid capital position.
Royal Bank generated net income of $11.9 billion in the first nine months of fiscal 2022. That’s down just 2% from the same period last year. Return on equity remains strong at 16.7%, and Royal Bank finished the third quarter (Q3) with a common equity tier-one ratio of 13.1%. This means the bank has excess capital it can use to ride out a downturn and make strategic acquisitions.
Royal Bank raised its dividend by 11% near the end of last year and then increased the payout by another 7% in 2022. The current yield is about 3.9%.
Long-term investors have done well with Royal Bank stock. A $20,000 investment in the shares 25 years ago would be worth about $330,000 today with the dividends reinvested.
BCE
BCE (TSX:BCE) is Canada’s largest communications company with a current market capitalization of $57 billion. BCE continues to make the investments needed to maintain its strong competitive position and provide customers with the broadband capacity and speed they require. BCE is running fibre-optic lines to the buildings of another 900,000 customers in 2022 and is expanding its 5G mobile network.
The company reported solid Q3 2022 results and confirmed the financial guidance for the year. BCE stock looks cheap right now near $62. It was as high as $74 at the 2022 peak. Investors who buy now can get a 5.9% dividend yield.
A $20,000 investment in BCE stock 25 years ago would be worth about $360,000 today with the dividends reinvested.
CN Rail
CN (TSX:CNR) operates a unique network of rail lines that connects ports on three coasts. This is a competitive advantage for CN when bidding on shipment contracts for domestic and international clients.
CN reported strong Q3 2022 results that showed the company has the pricing power to pass increased fuel costs along to its customers. Adjusted diluted earnings per share jumped 40% to $2.13. Management raised guidance for the year and strong demand for CN’s services is expected in 2023, even if the economy goes into a recession.
CN’s dividend yield is only about 1.8%, but the company is one of the best dividend-growth stocks in the TSX Index over the past two decades.
A $20,000 investment in CN stock 25 years ago would be worth about $775,000 today with the dividends reinvested.
The bottom line on top stocks to buy for a retirement portfolio
Royal Bank, BCE, and CN are leaders in their industries and have delivered strong total returns for patient investors. There is no guarantee that future results will be the same, but these stocks still look attractive to buy for a diversified retirement portfolio.
