The S&P/TSX Composite Index has been on a roller coaster in 2023. As of this writing, the Canadian benchmark equity market index is down 4.32% from its 52-week high. With the recent-most market correction, Canadian investors have plenty of opportunities to invest in high-quality stocks at discounted prices.
Using the downturn to find and invest in high-quality dividend stocks can allow Canadian investors to lock in higher-yielding dividends and a shot at decent capital gains when the market begins recovering. By identifying and buying dividend stocks with a reputation for increasing payouts, you can set yourself up for substantial passive income and capital gains.
While the markets recover from the impact of rising inflation, the high-yielding dividend income can offset some of the losses you might face in your self-directed investment portfolio.
Toronto-Dominion Bank
Toronto-Dominion Bank (TSX:TD) is one of the Big Six Canadian banks. The Toronto-based $143.44 billion market capitalization banking and financial services company recently scrapped its plan to acquire First Horizon, a U.S.-based bank with 400 branches in the southeastern U.S.
With the US$13.4 billion acquisition no longer taking place, TD Bank is sitting on a mountain of cash. While the market situation does not indicate another acquisition might be underway, the excess capital fortifies TD Bank stock as a safe investment among its peers.
The onset of a recession due to higher interest rates may lead to more loan defaults. If a major economic meltdown arrives, the extra cash can help TD Bank stock to weather the storm comfortably. While holding onto this much cash does not drive revenue growth, it is a good safety measure against a recession.
As of this writing, TD Bank stock trades for $78.99 per share, down by 16.68% from its 52-week high. Currently, it pays its shareholders their dividends at a juicy 4.86% dividend yield.
Canadian Natural Resources
Canadian Natural Resources (TSX:CNQ) is a major player in the Canadian energy sector. The $82.76 billion market capitalization energy stock, also called CNRL, is headquartered in Calgary. The company boasts some of the largest natural gas reserves among its peers in the country. Also boasting extensive oil-production operations, its natural gas reserves give it some stability when oil prices become unstable.
Growing oil prices boost its revenues, while its natural gas reserves protect it during commodity price volatility. This approach to operating in the Canadian energy sector has been successful for CNRL stock for over two decades. CNRL stock has managed to fund growing its shareholder dividends consistently for the last 22 years, and it looks well positioned to continue its streak as a Canadian Dividend Aristocrat.
Boasting efficient operations that offer low-cost production and long-lasting reserves to complement it, CNRL stock can continue funding its high-yielding dividends. As of this writing, CNRL stock trades for $74.97 per share, boasting a 4.80% dividend yield.
Foolish takeaway
TD Bank stock and Canadian Natural Resources stock are top-notch dividend stocks. While they have been impacted by broader market weakness, these two industry giants are well capitalized enough to ride the wave and come out stronger when the dust settles.
With the potential to deliver reliable dividend income, these stocks can keep lining your account balance with cash while you wait for the markets to recover.
