The market pullback is giving investors a chance to buy some top TSX dividend stocks at discounted prices for their self-directed Registered Retirement Savings Account (RRSP) portfolios.
Buying stocks during a market correction takes courage. Share prices can continue to slide in the near term. However, good dividend growth stocks usually bounce back when the market rebounds and getting in during the dip can generate solid long-term returns for a retirement fund.
Bank of Montreal
Bank of Montreal (TSX:BMO) paid its first dividend in 1829. Since then, investors have received a slice of the profits every year. This is a great track record considering all the economic upheavals that have occurred over the past two centuries.
Bank of Montreal is betting big on the U.S. market. The company closed its US$16.3 billion takeover of Bank of the West in early February this year. The deal added more than 500 branches and expands Bank of Montreal’s presence to more than 30 states. The majority of Bank of the West’s deposits originate in California. The purchase gives Bank of Montreal a good foothold in the States.
Bank of Montreal trades near $118 per share at the time of writing compared to $136 in February.
Investors who buy the dip can get a dividend yield of close to 5%. The board increased the dividend when Bank of Montreal reported the fiscal Q2 2023 results. This decision suggests the management team is comfortable with the revenue and earnings outlook, even as the bank sector faces some economic headwinds.
Canadian Natural Resources
Canadian Natural Resources (TSX:CNQ) might not be the first stock that comes to mind when investors start to look for top TSX dividend stocks. Oil and gas producers often have volatile revenue streams due to their reliance on commodity prices.
CNRL, however, has managed to deliver dividend increases annually for the past 23 years with a compound annual dividend growth rate of better than 20% during that timeframe. The reason for the stability lies in the product mix, as well as management’s knack for buying assets at distressed prices during downturns and reaping the rewards when oil and natural gas prices recover.
CNRL has a strong balance sheet that gives the company good financial flexibility. The surge in oil and gas prices off the 2020 market crash enabled CNRL to reduce debt and buy back stock while also boosting the base dividend and even handing out a bonus distribution of $1.50 per share in August last year. As net debt continues to decline, the company plans to return even more free cash flow to shareholders.
You need to be an oil and gas bull to buy energy stocks for the long haul. If you are in that camp, CNRL looks attractive right now near $72 per share and offers a 5% dividend yield.
The bottom line on top RRSP stocks
Bank of Montreal 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.
