Top TSX dividend stocks usually bounce back after market corrections. This is particularly true when they have strong track records of dividend growth. Investors can take advantage of dips in great dividend stocks to pick up higher yields and potentially benefit from decent capital gains when the share price rebounds.
Enbridge
Enbridge (TSX:ENB) raised its dividend in each of the past 28 years, and investors should see the streak continue, supported by targeted earnings per share (EPS) growth of at least 4% and distributable cash flow (DCF) growth of 3-5%.
The company is a giant in the North American energy infrastructure industry with a current market capitalization of close to $100 billion. Enbridge is working on a $17 billion capital program and has the financial firepower to make strategic acquisitions. Management is shifting its investment focus to capitalize on export opportunities and expand the renewable energy group. The company has a 30% stake in the new Woodfibre liquified natural gas (LNG) facility being built on the coast of British Columbia. Enbridge already owns an oil export terminal in Texas.
ENB stock trades for close to $49 per share at the time of writing compared to $59 in June last year. The dip gives investors a chance to pick up a 7.2% dividend yield and wait for ongoing dividend hikes to boost the return.
Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS) has a new chief executive officer (CEO) this year who could implement major changes at the bank after the completion of a strategic review of the the Canadian and international operations. The bank is already planning to boost its presence in British Columbia and Quebec where its sees solid growth potential.
On the international side, Bank of Nova Scotia has operations primarily focused in the Pacific Alliance trade bloc area that includes Mexico, Peru, Chile, and Colombia. In his statement to shareholders earlier this year, the CEO highlighted opportunities for growth in Mexico, but pundits speculate the assets in the other three Latin American markets could be monetized with the funds reallocated to new growth initiatives.
It will likely be the end of 2023 or early 2024 before investors find out what the plans are for driving better shareholder returns. In the meantime, investors might want to start nibbling on BNS stock while it is out of favour. The shares trade near $66 at the time of writing compared to more than $80 at the peak last year.
Bank of Nova Scotia has a solid capital base to ride out a potential recession and fears about risks of major losses on the Canadian residential housing portfolio are probably overblown. Credit losses are expected to rise in the coming quarters due to the steep increase in borrowing costs, but things would have to get really bad before Bank of Nova Scotia takes a material hit.
The board just raised quarterly dividend, so Bank of Nova Scotia’s management team can’t be too worried about the outlook for revenue and profits. Near-term volatility should be expected, but the stock already looks oversold, and new investors can now pick up a 6.4% dividend yield.
The bottom line on top dividend stocks
Enbridge and Bank of Nova Scotia pay attractive dividends that should continue to grow. If you have some cash to put to work, these stocks deserve to be on your radar.
