The market correction is serving up some great deals on top TSX dividend stocks. Buying stocks during a pullback takes some courage, but it can also help self-directed Registered Retirement Savings Plan (RRSP) investors boost the long-term returns on their savings.
Fortis
Fortis (TSX:FTS) is a Canadian utility company with $65 billion in assets located across Canada, the United States, and the Caribbean. The company’s last two large acquisitions (Tucson Electric Power for US$4.5 billion and ITC Holdings for US$11.3 billion) occurred in the United States to help balance out the geographic and segment exposure.
Fortis gets 99% of its revenue from rate-regulated businesses that include power-generation sites, electricity transmission network infrastructure, and natural gas distribution utilities. Commercial and residential buildings need power and fuel, regardless of the state of the economy, so Fortis has a revenue stream that should be predictable through an economic downturn.
The current $22.3 billion capital plan runs through 2027. Additional growth opportunities are on the drawing board, and another acquisition wouldn’t be a surprise over the medium term. As it stands, management expects the rate base to expand by about 6% annually through the next five years. This should support targeted dividend increases of at least 4% per year into 2027. Fortis has increased the payout annually for nearly five decades.
Fortis trades for close to $56 per share at the time of writing compared to the 2022 peak above $64. Investors who buy the dip can now get a 4% yield.
Canadian Natural Resources
Canadian Natural Resources (TSX:CNQ) raised its dividend in each of the past 23 years and the compound annual dividend growth rate is above 20% over that timeline. This is a solid track record, especially from a company that relies on commodity prices to determine revenues.
CNRL’s secret to success lies in its mixed portfolio of oil and natural gas assets and the flexibility the firm has to quickly move capital around the asset base to capitalize on positive changes in the energy market. CNRL is well known for its oil sands and conventional oil production, but it also has offshore oil and is one of the largest natural gas players in Canada with vast untapped land positions in key gas plays in the country.
The export of liquified natural gas (LNG) from British Columbia will start in the next few years, as LNG facilities are completed. CNRL is in a good position to benefit from the opening of the new access to buyers in Asia and other regions.
CNRL used the cash windfall from the rebound in oil and natural gas prices in 2021 and 2022 to reduce debt, buy back stock, and hike the dividend. As net debt continues to fall the company plans to return a higher percentage of free cash flow to shareholders.
At the time of writing, CNQ stock trades for close to $71 compared to $88 at the high last year. Investors can now get a 5% yield.
The bottom line on top dividend stocks to buy on a dip
Fortis and CNRL pay attractive dividends that should continue to grow. If you have some cash to put to work in a self-directed RRSP, these stocks deserve to be on your radar today.
