Investors who missed the big rally off the 2020 market crash are getting another opportunity to buy top Canadian dividend stocks at discounted prices.
In fact, the market correction in some segments is driving share prices of great TSX divided stocks down to the point where yields are very attractive, and investors have a decent shot at generating good long-term returns on new positions for their self-directed Registered Retirement Savings Plan (RRSP) portfolios.
BCE
BCE (TSX:BCE) is Canada’s largest communications services provider with a current market capitalization near $54 billion. The company spends billions of dollars every year on network upgrades to ensure its customers have the broadband capacity they need. These investments also help to protect BCE’s strong competitive position in the Canadian market.
In 2022, BCE invested roughly $5 billion on projects that included the continuation of the fibre-to-the-premises initiative and the expansion of the 5G mobile network. The programs should BCE up for revenue growth in the coming years, as new services and additional premium plans are launched.
The mobile and internet subscriptions revenues would normally hold up well during a recession due to their essential nature. This should make BCE a good stock to consider if you are of the opinion that an economic downturn is on the way in 2024.
BCE’s media group saw revenue slide 5.5% in the first quarter (Q1) of 2023 compared to the same period last year. The division could be in for a rough ride if the economy falters. Advertisers tend to trim marketing budgets to preserve cash flow when times get tough. BCE recently announced a big round of layoffs in the media operations and is closing several radio stations.
Regulatory restrictions are always a threat for BCE and its peers. As Canada closes in on the next election in 2025, investors should brace for strong rhetoric targeted at the communications firms.
Despite the potential economic and political headwinds, BCE stock looks attractive right now after a steep decline. BCE trades for close to $59 per share at the time of writing. It was near $74 at the peak last year.
BCE confirmed its 2023 guidance for revenue growth of 1-5% and free cash flow growth of 2-10%. Combined with the strong balance sheet this should support another solid dividend increase for 2024.
BCE raised the payout by at least 5% in each of the past 15 years. Investors who buy the stock at the current level can get a 6.5% dividend yield.
Canadian Natural Resources
Canadian Natural Resources (TSX:CNQ) raised its dividend in each of the past 23 years, and investors have received a compound average annual dividend-growth rate of better than 20% over that timeframe. This is a solid track record for any top TSX dividend stock, let alone one that relies on commodity prices to determine revenue.
CNRL has vast oil and natural gas production operations and reserves. The mix includes oil sands, conventional heavy oil, conventional light oil, offshore oil, and natural gas assets. Management has a knack for making acquisitions at the bottom of the commodity cycle and then reaping the rewards on the assets when the market recovers.
CNRL enjoys a strong balance sheet. The company used the cash windfall from the rebound in oil and natural gas prices in 2021 and 2022 to buy back stock, reduce debt, and put more cash in the pockets of investors. CNRL will likely continue to boost the base dividend each year, and investors could see more bonus payouts like the $1.50 per share gift they received last August.
CNQ stock trades near $72 per share at the time of writing compared to $88 at the high last year. Investors who buy the dip can now get a 5% yield and simply wait for the next surge in the energy sector.
The bottom line on top stocks for RRSP investors
BCE 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 look cheap today and deserve to be on your radar.
