The latest market correction gives Canadian savers another opportunity to buy great TSX dividend stocks at discounted prices for their self-directed Registered Retirement Savings Plan (RRSP) portfolios. Buying stocks during a downturn takes courage, but a contrarian strategy can boost RRSP returns in the long run.
Bank of Montreal
Bank of Montreal (TSX: BMO) has paid investors a dividend every year for nearly two centuries. That’s an amazing track record that is expected to continue. The long history of reliability also shows that Bank of Montreal can ride out challenging economic times.
The stock currently trades for close to $121 per share compared to the 12-month high around $140 we saw last spring.
Bank stocks are down due to rising recession fears and the recent failures of some regional banks in the United States. Bank of Montreal actually completed its US$16.3 billion acquisition of California-based Bank of the West earlier this year right before the meltdown of another bank based in the state. Investors might be concerned that BMO Harris Bank, the U.S. subsidiary, paid too much. That could be the case, but investors should see long-term benefits from the acquisition that gives BMO a foothold in the massive California market and adds more than 500 branches to the American business.
Investors who buy the stock at the current price can get a 4.7% dividend yield.
Telus
Telus (TSX: T) should be a good stock to own during a recession. The communications firm provides Canadian residential and commercial customers with mobile and internet services that are required regardless of the state of the economy. On the residential side, people are also likely to cut other discretionary spending before they axe their spending on their TV and streaming services. In fact, trips to the movies and restaurants will typically be replaced by movie nights at home when budgets get tight.
Telus doesn’t have a media division. This hasn’t held back growth in recent years and will likely insulate the business from some of the challenges that its peers might face as companies cut marketing budgets and reduce advertising on radio and TV networks.
Telus trades near $28.50 at the time of writing. That’s down from more than $34 at the 12-month peak.
The pullback appears overdone when you look at the 2022 results and the 2023 guidance. Telus generated solid earnings and free cash flow last year and expects operating revenue to jump 11% in 2023. Free cash flow is expected to surge from $1.3 billion in 2022 to $2 billion in 2023.
This should ensure another round of generous dividend increases. Telus typically raises the dividend by 7-10% per year. At the time of writing, investors can get a 4.9% dividend yield.
The bottom line on top stocks for retirement plans
Bank of Montreal and Telus pay attractive dividends that should continue to grow. If you have some cash to put to work in a self-directed RRSP, these stocks deserve to be on your radar.
