The market correction is giving Canadian investors a chance to buy top TSX dividend stocks at discounted prices for their self-directed Registered Retirement Savings Plan (RRSP) portfolios.
Buying stocks when everyone else is selling takes some courage and cheap stocks often get even cheaper before they bounce. However, good dividend stocks pay you well to ride out the pullbacks and buying the dips can boost long-term total returns.
TC Energy
TC Energy (TSX:TRP) is a major player in the North American energy infrastructure industry with more than $100 billion in assets located in Canada, the United States, and Mexico.
Natural gas transmission and storage make up the core of the operations, but TC Energy also has oil pipelines and power-generation facilities. The share price is down considerably over the past year.
The pullback is probably exaggerated at this point, despite a weaker-than expected valuation on the monetization of 40% of the Columbia Gas Transmission and Columbia Gulf Transmission pipelines. TC Energy is getting about $5.2 billion for the disposition, which puts the asset value at $13 billion. TC Energy paid US$13 billion for Columbia Pipeline Group seven years ago, including the assumption of US$2.8 billion in debt.
Management still expects to raise the dividend by at least 3% per year over the medium term. Investors who buy TRP stock at the current price can get a 7.5% dividend yield.
CIBC
CIBC (TSX:CM) trades for less than $58 per share at the time of writing compared to more than $80 in early 2022. The pullback is due to rising fears that banks will get hit with large loan defaults once the full impact rate increases hits the economy.
Loans on office buildings are one area of interest. At the same time, investors are concerned that overleveraged residential property owners will increasingly have to sell or give up their homes or condos if they are unable to cover the jump in mortgage costs.
If the economy goes into a deep recession and unemployment surges, there could be trouble for the banks. CIBC has a large residential mortgage portfolio relative to its size, so a meltdown in the housing market would likely put pressure on the stock.
For the moment, however, the drop in the share price looks overdone. CIBC has a solid capital position to ride out a downturn and the stock now offers a 6% dividend yield. CIBC recently raised the dividend, so management can’t be too concerned about the earnings outlook.
Suncor
Suncor (TSX:SU) is a contrarian pick. The integrated energy giant fell out of favour with investors when it slashed the dividend by 55% in the early part of the pandemic crash. Since then, the board brought the payout back to the previous level and even increased the dividend to a new high, but the stock is still in the dumps.
Safety issues, operational challenges, and the recent cyber attack have all had an impact, but Suncor should eventually get its act together, and investors who buy the stock at the current price near $40 can get a 5.2% dividend yield while they wait for the rebound.
Suncor traded as high as $53 per share in 2022, so there is decent upside potential on a recovery.
The bottom line on oversold dividend stocks
TC Energy, CIBC, and Suncor all 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.
