The market correction is giving self-directed Registered Retirement Savings Plan (RRSP) investors a chance to buy top TSX dividend stocks at discounted prices. BCE (TSX:BCE) and Enbridge (TSX:ENB) are industry leaders trading well below their 12-month highs. Investors with an eye for value are wondering if one of these stocks is now undervalued and good to buy for a retirement portfolio.
BCE
Historically, retirement savers and other dividend investors bought BCE for its stable telephone service revenues and the reliable and generous distribution. The business has changed considerably in the past 20 years from a wireline phone company that relied on landline connections to a diversified mobile, internet, and media player, but it still churns out steady cash flow.
The media group certainly ads some volatility to the revenue stream due to its reliance on advertising spending by businesses. When economic times get tough, companies tend to cut back on their marketing budgets, and this can impact the TV, radio, and online ad revenue the media division relies on to drive profits. However, BCE still gets the majority of its revenue from essential internet and mobile services. As a result, the stock deserves to be viewed as a recession-resistant pick for a portfolio.
BCE stock trades near $60.50 at the time of writing compared to more than $73 at the high last year.
The slide that has occurred appears overdone, even as rising interest rates are expected to increase BCE’s borrowing costs and put some pressure on overall earnings.
Management expects revenue and free cash flow to increase in 2023, despite the headwinds, so there should be good support for another dividend boost for 2024. BCE increased the payout by more than 5% for 2023 and has hiked the distribution by at least this amount annually for the past 15 years.
At the time of writing, the stock offers a yield of 6.4%.
Enbridge
Enbridge started a transition process before the pandemic that saw the firm monetize roughly $8 billion in non-core assets. These initiatives helped shore up the balance sheet and enabled Enbridge to get through the crash in the energy sector in decent shape. Management continues to shift focus from large oil pipeline projects, that are hard to get approved and built, to new emerging opportunities in oil export, natural gas export, and renewable energy.
Enbridge purchased an oil export terminal in Texas in late 2021 and took a 30% stake last year in the Woodfibre liquified natural gas (LNG) facility being built in British Columbia. Enbridge also expanded its renewable energy group in 2022 through an acquisition in the United States.
Enbridge has a capital program worth $18 billion that should help drive revenue and cash flow growth in the near term. The board increased the dividend by more than 3% for 2023, marking the 28th consecutive annual hike to the payout.
The stock appears undervalued at the current price near $51.50 and offers an attractive 6.9% yield.
Is one a better stock to buy now?
BCE and Enbridge pay attractive dividends that should continue to grow. At these levels, I would probably split a new RRSP investment between the two stocks.
