Top Canadian Dividend Stocks to Start a TFSA Retirement Fund

These top TSX dividend stocks offer great yields today.

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Investors who missed the bounce off the 2020 market crash are getting another chance to buy top TSX dividend stocks at discounted prices. In fact, the market correction in some sectors now has stocks with great dividend-growth track records offering very attractive yields and a shot at meaningful total returns for investors building self-directed Tax-Free Savings Account (TFSA) retirement portfolios.

TC Energy

TC Energy (TSX:TRP) operates more than $100 billion in energy infrastructure and power generation assets in Canada, the United States, and the Caribbean. The core business focuses on the transmission and storage of natural gas. TC Energy has 93,000 km of natural gas pipelines and 650 billion cubic feet of natural gas storage capacity.

TRP stock is out of favour with investors. Part of this is due to a decline in the broader energy infrastructure sector over the past year caused by rising interest rates. Higher rates translate into more expensive borrowing costs to fund capital programs. This, in turn, can reduce cash available for distributions.

In addition, income investors who normally buy pipeline stocks for the big dividends can now get good rates from Guaranteed Investment Certificates (GICs) without taking on the risk that comes with owning stocks.

At this point, TC Energy is probably oversold. The stock trades near $52 at the time of writing compared to more than $70 at the 12-month high.

Management expects the $34 billion capital program to drive revenue and cash flow growth to support annual dividend increases of at least 3% in the coming years.

Bank of Nova Scotia

Bank of Nova Scotia (TSX:BNS) has a new chief executive officer who is focused on delivering better total returns for investors after the bank’s underperformance compared to its peers in recent years. Investors who like high dividend yields and a shot at big capital gains might want to consider buying BNS stock while it is still out of favour.

Bank of Nova Scotia trades near $67 per share at the time of writing compared to $93 in early 2022. The drop looks overdone, even as the bank sector deals with the threat of a recession and higher default rates on commercial and residential loans.

Bank of Nova Scotia increased its provision for credit losses (PCL) in the fiscal second quarter (Q2) of 2023 by nearly $500 million compared to the same period last year. This sounds like a big number, but it is tiny in relation to the size of the total loan book.

Fiscal Q3 adjusted net income came in at roughly $2.2 billion for the quarter, and return on equity was 12.4%. These are weaker numbers than the same period in the previous year, largely due to the PCL, but Bank of Nova Scotia remains very profitable.

The board increased the dividend when the company announced the fiscal Q2 2023 results. That should be a signal that management is comfortable with the earnings outlook. Investors who buy BNS stock at the current level can get a 6.3% dividend yield.

The bottom line on top stocks to buy for a retirement portfolio

TC Energy and Bank of Nova Scotia pay attractive dividends that should continue to grow. If you have some cash to put to work in a self-directed TFSA, these stocks look cheap today and deserve to be on your radar.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool recommends Bank Of Nova Scotia. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker has no position in any stock mentioned.

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