A market correction can be scary for Tax-Free Savings Account (TFSA) investors with large portfolios of stocks. However, pullbacks also give investors with a buy-and-hold strategy the opportunity to acquire top TSX dividend stocks at cheap prices.
Economic uncertainty is currently on the horizon, so it makes sense to search for stocks that tend to increase their dividends every year, regardless of whether there is a recession or a booming economy. These types of stocks usually see their share prices rebound after dips due to broad-based pullbacks in the equity markets.
Fortis
Fortis (TSX:FTS) is a Canadian utility company with $65 billion in assets located in Canada, the United States, and the Caribbean. The businesses include power generation, electricity transmission, and natural gas distribution operations. Nearly all of the revenue generated by Fortis comes from regulated businesses. This means cash flow tends to be predictable and reliable, which makes it easier for management to plan new investments for growth.
Fortis trades for close to $57 per share at the time of writing. That’s down from a 2022 high around $65.
Fortis is currently working on a $22.3 billion capital program. The resulting increase in the rate base is expected to support annual dividend growth of at least 4% over the next five years. That’s solid guidance in the current era of economic uncertainty.
Fortis increased the dividend in each of the past 49 years. At the current share price, the stock provides a 4% annualized yield.
Canadian Natural Resources
Energy producers don’t often make the cut for dividend-growth portfolios due to their reliance on commodity markets to determine revenue and profits. CNRL (TSX:CNQ), however, is a special case.
The board increased the dividend in each of the past 23 years with a compound annual growth rate of better than 20% over that stretch. This consistency points to the company’s solid balance sheet, efficient operations, and strategic dealmaking when the energy sector hits a rough patch.
CNRL tends to own 100% of its domestic operations rather than bring in partners to help finance the projects. The strategy increases risks, but also gives management the flexibility to shift capital around the portfolio relatively quickly to take advantage of positive moves in commodity prices. CNRL operates oil sands, conventional heavy oil, conventional light oil, offshore oil, and natural gas assets.
Canadian, U.S., and international demand for oil and natural gas is expected to grow in the coming years, even as the world shifts to electric vehicles and more renewable energy for power production. Airlines are placing orders for hundreds of new planes to meet soaring travel demand. Utilities around the globe need to have reliable fuel-fired power production to support wind, solar, and hydroelectric power assets that have limitations.
At the time of writing, CNQ stock trades for close to $75 compared to the 2022 high around $88 per share. Investors who buy the dip can pick up a 4.8% dividend yield.
The bottom line on top TSX dividend stocks to buy on a pullback
Fortis and CNRL pay attractive dividends that should continue to grow. If you have some cash to put to work in a TFSA, these stocks deserve to be on your radar.
