Canadian savers with some cash to put to work in their self-directed Registered Retirement Savings Plan (RRSP) can take advantage of the market correction to buy top TSX dividend stocks at undervalued prices.
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TD Bank
TD (TSX:TD) recently abandoned its planned US$13.4 billion takeover of First Horizon, a regional bank with more than 400 branches in the southeastern part of the United States. Regulatory hurdles are cited as the reason for the deal falling apart, although the plunge in First Horizon’s share price since the deal was announced likely had an impact. TD originally agreed to buy First Horizon for US$25 per share. The stock was around US$18 when TD called off the deal and First Horizon currently trades near US$11.
TD is now sitting on a monster pile of excess cash. This ensures it can ride out any coming turbulence in the economy, but investors want to see how TD will use to extra funds that were earmarked for the First Horizon purchase.
TD stock trades below $78 per share at the time of writing compared to $93 in February. The shares were as high as $109 in early 2022.
Unlike its peers, TD didn’t announce a dividend increase when it reported fiscal second-quarter 2023 results. This might be part of the reason the stock slipped more than 4% on the earnings announcement. TD generated adjusted earnings of $3.8 billon in the quarter, up about 1% compared to the same period last year.
TD said its no longer expects to meet its earnings-per-share (EPS) growth target of 7% to 10%, largely due to the termination of the First Horizon deal and worsening macroeconomic conditions.
Additional downside is possible in the near term, but contrarian investors might want to start adding TD to their portfolios. The stock now looks cheap, and you can get a dividend yield of close to 5%.
Enbridge
Enbridge (TSX:ENB) trades for less than $49 per share compared to $59 in early June last year.
The decline looks overdone, given the solid financial results in the past 12 months and the positive guidance for revenue and distributable cash flow (DCF) in 2023 and the coming years.
In the March 2023 investor update, the company said it is targeting annual EPS growth of at least 4% and DCF growth of about 3% through 2025. Growth in EPS and DCF is then expected to be 5% per year beyond the next three years.
That’s solid guidance and should support ongoing dividend increases. Enbridge raised the payout in each of the past 28 years. Investors who buy the stock at the current price can get a 7.25% dividend yield.
The bottom line on top RRSP stocks
TD and Enbridge are TSX giants paying attractive dividends that should continue to grow. If you have some cash to put to work in a self-directed RRSP, these stocks look cheap today and deserve to be on your radar.
