A market correction can be scary in the short term, but it also gives retirees and other income investors a chance to buy top TSX dividend stocks at discounted prices to boost yields on retirement savings.
Bank of Montreal
Bank of Montreal (TSX:BMO) trades for close to $118 per share compared to $136 in February.
The latest pullback occurred after recent bank failures in the United States triggered a flood of selling in the bank sector. Investors are concerned that more damage could be on the way and they don’t want to get caught holding the wrong bank stocks.
Bank of Montreal has a large U.S. operation and actually closed its US$16.3 billion takeover of Bank of the West right before chaos hit the U.S. regional banks in March. This has investors wondering if Bank of Montreal paid too much for the assets.
That could be the case, but the addition of more than 500 branches located primarily in California sets BMO Harris Bank, the U.S. subsidiary, up for good growth potential in the coming years.
Bank of Montreal paid its first dividend in 1829. Investors have since received a distribution every year. The payout should continue to grow, and investors who buy the stock today can get a solid 4.8% dividend yield.
Pembina Pipeline
Pembina Pipeline (TSX:PPL) trades for close to $42 per share at the time of writing compared to $53 in June last year.
The pullback has occurred as part of the broader slide in the energy sector. Oil and natural gas prices retreated from their post-pandemic highs in the past 12 months and remain under pressure. Falling commodity prices directly impact producers a lot more than energy infrastructure players, so the drop in Pembina Pipeline’s share price might be overdone.
The company reported solid first-quarter 2023 results. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at $947 million, down about 6% from the same quarter last year. An outage on the Northern Pipeline system was largely responsible for the drop. Wildfires in Alberta could cause additional shutdowns.
Despite the setback management maintained full-year guidance for adjusted EBITDA of $3.5 billion to $3.8 billion. Cash flow from operating activities is expected to be higher than dividends and capital expenditures. This is important for dividend investors who want to own companies that generate enough cash flow to cover the distributions. Excess cash flow is being used to reduce debt, strengthen the balance sheet, and build reserves for future capital projects.
The board also announced a 2.3% increase to the quarterly dividend.
Oil and natural gas demand remains strong and is expected to grow in the coming years. Pembina Pipeline is positioned well to benefit as a supplier of gathering, processing, and transmission services to energy producers.
Investors who buy PPL stock at the current price can get a 6.4% dividend yield.
The bottom line on top TSX dividend stocks
Bank of Montreal and Pembina Pipeline are good examples of top TSX dividend stocks paying attractive dividends that should continue to grow. If you have some cash to put to work, these stocks appear cheap today and deserve to be on your radar.
