The market correction is giving Canadian savers a chance to buy top TSX dividend stocks at discounted prices for their self-directed registered Retirement Savings Plan (RRSP) portfolios.
Buying during a downturn can be stressful and share prices could move even lower, but great dividend stocks with growing distributions tend to bounce back once the market recovery kicks into gear, helping boost total returns over the long run in the portfolio.
TC Energy
TC Energy (TSX:TRP) trades near $53 per share at the time of writing compared more than $73 at the high point last year.
The decline has occurred as part of the broader weakness in the energy sector that hit both producers and the infrastructure players. TC Energy’s core operations focus on the transmission of natural gas. The company has 93,000 km of pipelines and about 650 billion cubic feet of storage capacity across Canada, the United States and Mexico. TC Energy also has oil pipelines and power-generation facilities that round out the portfolio.
The company is working on a $34 billion capital plan that is expected to drive revenue and cash flow growth for several years. Management expects to put projects worth $6 billion into service this year. TC Energy generated solid first-quarter (Q1) 2023 results and confirmed the 2023 financial guidance. Comparable earnings in the first three months of 2023 came in at $1.21 per share, up from $1.12 in the same period last year.
Natural gas demand in domestic and international markets is expected to grow, as utilities switch to the fuel from coal and oil to produce power. The transition to renewables will continue, but solar, wind, and hydroelectric power have limitations. Utilities need reliable power generation that can meet surges in demand or cover times when there is no wind, cloudy conditions, or low water flows in rivers.
TC Energy’s natural gas infrastructure currently in place or under development enables the company to benefit from the anticipated demand growth for natural gas.
Management plans to increase the dividend by at least 3% annually over the next few years. Investors who buy TRP stock at the current level can get a 7% dividend yield.
Enbridge
Enbridge (TSX:ENB) is another major player in the North American energy infrastructure sector with vast oil pipeline networks that move 30% of the oil produced in Canada and the United States. The natural gas assets transport about 20% of the natural gas used by U.S. households and commercial operations. In addition, Enbridge has natural gas utilities serving million of customers in Canada, export facilities, and a growing renewable energy group with assets in North America and Europe.
Enbridge delivered Q1 2023 results that were largely in line with the same period last year. Management expects adjusted earnings per share (EPS) to grow by about 4% through 2025 and by 5% afterwards. Distributable cash flow (DCF) is expected to expand by 3% annually in the near term and by 5% beyond 2025. Enbridge has a $17 billion capital program on the go and could make additional strategic acquisitions to boost growth.
Commuters are hitting the highways again and airlines are placing orders for thousands of new planes to meet soaring travel demand. This means gasoline and jet fuel consumption is expected to continue to rebound, even as the global economy appears headed for a slowdown.
Enbridge trades for close to $48 per share at the time of writing compared to more than $59 in early June last year. Investors can now pick up a 7.3% dividend yield on ENB stock.
The bottom line on top dividend stocks for RRSP investors
TC Energy and Enbridge pay attractive dividends that should continue to grow. If you have some cash to put to work in a self-directed RRSP focused on dividends, these stocks deserve to be on your radar.
