TFSA (Tax-Free Savings Account) investors shouldn’t wait until the next market correction before buying stocks. Indeed, there are market bargains in any sort of environment. As valuations swell, mostly within the tech sector, investors may wish to reconsider the many names that got left behind in the bullish first half of 2023. Undoubtedly, a lot of stocks didn’t surge as quickly as some of the hyped-up artificial intelligence (AI) plays did!
Though a market correction can hit at any time (we may be overdue for one), TFSA investors shouldn’t simply stand by, waiting for a 10% decline in the broader averages before taking action. Personally, I’d look to purchase value stocks if they’re at a price that’s below your estimate of their worth.
Remember, even if the broad stock market is a tad on the frothy side after a glorious run, that does not mean everything is untouchable or at risk of a steep selloff.
Stocks can move together when the turbulence increases, but they don’t always have to. Oftentimes, the biggest, hottest winners tend to be the ones that give up to most back as the selloff sets in. For the stocks that didn’t really do much (or sold off as other stocks rose), I’d not at all be surprised if such names hold their own in the face of the next inevitable market pullback.
Undoubtedly, some stocks have the band-aid ripped off earlier than others. And in this piece, we’ll have a look at two TFSA-worthy dividend stocks that I think make for compelling buys on recent weakness.
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Suncor Energy
Suncor Energy (TSX: SU) and the broader basket of energy stocks have lost their lustre in recent months after outperforming in 2022. Undoubtedly, the tables have turned in a major way this year. And you can be sure that they will turn again in due time. While I have no idea when energy will lead the pack again, I do think the valuation in names like Suncor is getting a tad on the cheap side.
Even if oil goes no higher from here (WTI, or West Texas Intermediate, prices have settled around the US$70-per-barrel mark), Suncor stock could be a bountiful investment, thanks to the dividend. Suncor’s dividend yields 5.47% at writing. After a nearly 27% pullback off 2022 highs, I’d argue SU stock ought to be spared from the next market-wide pullback, which could be led by various technology names.
Canadian Natural Resources
Canadian Natural Resources (TSX: CNQ) is another large-cap energy play that’s incredibly well run. Like the rest of the energy patch, shares have come off from their highs. At writing, shares of CNQ are down just north of 11% from their highs. At around 8.9 times trailing price to earnings (9.2 times forward), the stock looks like a great value option for those seeking premier exposure to the energy patch.
With a 4.94% dividend yield, CNQ stock is also a great income play for TFSA investors who seek gains potential and big passive income.
The better buy for TFSA investors: Suncor or CNQ?
I like Suncor better at this juncture, mostly due to the slightly higher dividend yield and slightly lower price of admission.
