The market correction is giving self-directed Registered Retirement Savings Plan (RRSP) investors a chance to buy top TSX dividend stocks at discounted prices.
Canadian Natural Resources
Canadian Natural Resources (TSX:CNQ) trades near $77 per share at the time of writing. The stock has bounced around between roughly $60 and $88 over the past year, as investors piled in or bailed out in sync with the movements of energy prices.
CNRL generated adjusted net earnings of $1.88 billion in the first quarter (Q1) of 2023 compared to $3.34 billion in the same quarter last year. A steep decline in oil and natural gas prices are responsible for the drop. Equivalent barrels of oil production per day came in at 1.32 million, up from 1.28 million. This helped mitigate the hit from the decline in commodity markets.
Even at current oil and natural gas prices, free cash flow remains robust at 1.4 billion in the quarter after paying dividends and capital outlays. CNRL distributed $900 million as dividends and spent $700 million on share buybacks. Under the current repurchase program, the company can buy back up to 10% of the outstanding float.
CNRL pays a quarterly dividend of $0.90 per share and has increased the payout for 23 consecutive years with a compound annual growth rate of better than 20% over that timeframe.
Net debt was $11.9 billion at the end of March. As soon as net debt falls to $10 billion the board plans to return 100% of free cash flow to investors. This means additional dividend increases or special bonus dividends could be on the way. CNRL gave investors a bonus payment of $1.50 per share last August.
Oil bulls see West Texas Intermediate (WTI) heading back to US$100 per barrel in the next 12-18 months on rising demand and limited scope or appetite for global production increases.
Even at current prices, CNRL stock looks cheap at 9.1 times trailing 12-month earnings. Investors who buy now can get a 4.7% dividend yield.
Enbridge (TSX:ENB) generated adjusted Q1 2023 earnings of $1.7 billion that matched the same period last year. Distributable cash flow came in at $3.2 billion, up from $3.1 billion in Q1 2022.
The company’s Mainline oil pipeline continues to operate near capacity and a new agreement with producers is expected to keep the line at least 95% full through 2028.
Enbridge is best known as an oil pipeline company. It moves about 30% of the oil produced in Canada and the United States. Most new investment, however, is focused on other segments these days due to the challenges in getting large new oil pipelines approved and built. Enbridge is currently focused on renewable energy and export opportunities. It also has natural gas utilities that provide fuel to millions of Canadian homes and businesses.
The stock looks cheap around $53 right now compared to the 12-month high around $59.50. At the current price, the stock offers a 6.6% dividend yield.
Enbridge raised the payout in each of the past 28 years.
The bottom line on top TSX dividend stocks
CNRL and Enbridge are leaders in their respective industries and 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.