The recent leg of the market correction is giving contrarian investors another chance to buy great Canadian dividend stocks at discounted prices. Several stocks already look undervalued and could get even cheaper in the near term.
Bank of Montreal
Bank of Montreal (TSX:BMO) recently reported fiscal second-quarter (Q2) 2023 results. The market reacted by knocking the share price down nearly 4% to a new 12-month low under $113 per share.
This is despite the fact that the board increased the quarterly dividend by $0.04 per share to $1.47. At the time of writing, the new annualized dividend of $5.88 per share provides a yield of about 5.2%.
Adjusted provisions for credit losses jumped to $318 million from $50 million in the same period last year. Soaring interest rates in Canada and the United States are starting to put more borrowers in difficult financial situations.
Overall, however, the quarter was not that bad. Adjusted net income came in at $2.216 billion compared to $2.187 billion in the same quarter last year.
Bank of Montreal closed its all-cash takeover of Bank of the West earlier this year, shortly before the meltdown in the bank sector that was primarily caused by high-profile failures of two regional banks. Bank of Montreal still has a strong capital position to ride out any economic turbulence. The bank finished fiscal Q2 with a common equity tier-one (CET1) ratio of 12.2%.
The Bank of the West deal added 1.8 million customers served by more than 500 branches, with a heavy focus on California. Over the long term, the deal should be positive for Bank of Montreal shareholders.
TC Energy (TSX:TRP) already looks cheap, trading at close to $54 per share. The stock was as high as $74 in June last year.
Energy infrastructure stocks have drifted lower along with the share prices of the producers as oil and natural gas prices have given up some of their post-pandemic gains. The pullback in TC Energy and its peers is probably overdone.
These companies earn fees for moving or storing oil and natural gas. As long as demand remains robust for the services the actual prices of the commodities have limited direct impact on revenue. TC Energy operates more than 93,000 km of natural gas pipelines and roughly 650 billion cubic feet of natural gas storage. Oil pipelines and power-generation facilities are also part of the $100 billion asset portfolio.
TC Energy has struggled with soaring costs on its Coastal GasLink pipeline project, but the development is 87% complete as of the April 28 release of the Q1 2023 earnings report. Despite the headaches, TC Energy is still targeting annual dividend growth of at least 3% over the medium term.
Investors who buy TRP stock at the current level can get a 6.9% dividend yield.
The bottom line on top dividend stocks to buy on a dip
Bank of Montreal and TC Energy could move lower in the near term, but these stocks already look oversold and pay attractive dividends that should continue to grow. If you have some cash to put to work, TRP and BMO deserve to be on your watch list.