The market pullback is giving self-directed Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP) investors a chance to buy top TSX dividend stocks at discounted prices for portfolios focused on passive income and total returns.
Enbridge
Enbridge (TSX:ENB) is a major player in the North American energy infrastructure industry and one of Canada’s largest companies with a current market capitalization near $101 billion.
The shares trade around $50 right now compared to a 12-month high above $59.
Investors who buy Enbridge at this level can pick up a solid 7% dividend yield. Enbridge has raised the dividend in each of the past 28 years.
The first-quarter (Q1) 2023 results came in comparable to the same period in 2022. Management is targeting earnings per share (EPS) and distributable cash flow (DCF) growth of about 3% per year through 2025 and 5% annually after that timeframe. The $17 billion capital program should help drive steady revenue and cash flow growth in the medium term. Enbridge also has the financial clout to make strategic acquisitions to boost profits. As such, investors should see dividends continue to rise.
Oil demand and natural gas demand are expected to increase in the coming years. The rebound in air travel and the return of workers to offices is driving the near-term recovery in fuel demand. Natural gas exports are growing as international buyers seek out reliable sources of the fuel after disruptions caused by the war in Ukraine.
Enbridge is shifting its focus to the export market to capitalize on new opportunities. The company purchased an oil terminal in Texas in 2021 and has a 30% stake in the Woodfibre liquified natural gas (LNG) project being built in British Columbia.
TD Bank
TD (TSX:TD) is sitting on a war chest of excess capital. The company recently abandoned its effort to buy First Horizon for US$13.5 billion in cash, leaving TD with more than enough money to ride out any turbulence that might be on the way in the Canadian and U.S. economies.
Sitting on too much money can also be negative for banks, because they are not using the funds to drive revenue and profit growth. However, the situation should be a near-term positive for TD investors. The bank might decide to ramp up share buybacks, increase the base dividend, or provide shareholders with a special bonus dividend.
Regulatory issues caused TD to end to takeover attempt of First Horizon, so another large deal might not be on the way in the next couple of years in the American market. However, TD could decide to take advantage of reduced bank valuations to make an acquisition in another market.
TD remains very profitable and has a great track record of dividend growth. At the time of writing, the stock trades for close to $82 per share compared to the 12-month high around $97.
Investors who buy TD stock at the current level can get a 4.7% yield. Buying TD on big dips has historically proven to be a profitable strategy over the long run.
The bottom line on top TSX dividend stocks
Enbridge and TD are good examples of top Canadian dividend stocks paying attractive distributions that should continue to grow. If you have some cash to put to work in a TFSA or RRSP, these stocks deserve to be on your radar.
