The latest leg of the market correction is giving investors a chance to buy some top TSX dividend stocks at cheap prices for self-directed Tax-Free Savings Account (TFSA) and Registered Retirement Saving Plan (RRSP) portfolios.
Enbridge
Enbridge (TSX:ENB) operates a strategically important network of oil and natural gas pipeline infrastructure in Canada and the United States. The company moves 30% of the oil produced in the two countries, owns an oil export terminal in Texas, has natural gas-distribution utilities that supply millions of customers in Canada with essential fuel, and is a partner in the new Woodfibre liquified natural gas (LNG) facility being build in British Columbia. In addition, Enbridge has a growing renewable energy division and is positioned well to capitalize on carbon capture and hydrogen opportunities.
Enbridge trades near $48 per share at the time of writing compared to $59 in early June last year.
The drop has coincided with weakness in oil and gas producer stocks, but the pullback appears overdone. Enbridge generated solid first-quarter (Q1) 2023 results that were largely in line with the same period last year. Guidance on adjusted earnings per share (EPS) and distributable cash flow (DCF) growth is decent for the next few years, supported by a $17 billion capital program.
As long as fuel demand remains robust, the shifts in oil or natural gas prices should have a limited direct impact on Enbridge’s revenue stream. The company doesn’t produce the commodities, it simply moves them and charges a fee for the service.
Investors who buy Enbridge stock at the current level can get a 7.4% dividend yield. The board raised the payout in each of the past 28 years.
Bank of Montreal
Bank of Montreal (TSX:BMO) closed its US$16.3 billion acquisition of Bank of the West in early February, right before two California-based banks failed and triggered a plunge in the share prices of regional banks in the United States.
In hindsight, investors might think the deal was too expensive. That could be the case. However, Bank of the West adds roughly 1.8 million customers and more than 500 branches with a strong presence in the California market. At the time of the deal’s closing, Bank of Montreal became the eighth-largest bank in North America by assets with a footprint in 32 U.S. states. Investors should see long-term benefits emerge from the Bank of the West deal, as the American economy continues to expand.
BMO stock trades for close to $118 per share at the time of writing compared to $136 in February. Investors can get a 5% dividend yield at this level and wait for the rebound in the bank sector. Bank of Montreal has a great track record of paying dividends. Shareholders have received a distribution annually since 1829.
Near-term volatility in bank stocks should be expected until the Bank of Canada and the U.S. Federal Reserve finish raising interest rates and the full impact on the economy becomes evident.
The bottom line on top TSX dividend stocks
Enbridge and Bank of Montreal pay attractive dividends that should continue to grow. If you have some cash to put to work in a self-directed TFSA or RRSP focused on passive income or total returns, these stocks deserve to be on your radar.
