A market correction is difficult to watch, and cheap stocks often get a lot cheaper before they recover. However, pullbacks give buy-and-hold buyers an opportunity to acquire top TSX dividend stocks at discounted prices for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio.
BCE
BCE (TSX:BCE) trades near $56 per share at the time of writing compared to $74 at one point in 2022.
The drop has driven the dividend yield to 6.9%. This is a good return on a stock that has increased the payout by at least 5% annually for the past 15 years.
BCE will report lower profits in 2023 compared to last year. Part of the hit is coming from higher borrowing costs caused by the jump in interest rates. BCE is also restructuring its media operations to adjust to a slump in ad spending at its radio and TV assets.
The market, however, might be overlooking the strength of the core mobile and internet businesses that continue to grow and drive the bulk of BCE’s revenues. These are essential services that should hold up well during a recession. BCE’s investments in its 5G network and the fibre-to-the-premises program will help boost revenues in the coming years as people require more bandwidth for work and entertainment.
Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS) has a new CEO this year who is putting the bank through a strategic review to identify opportunities to reduce costs and make the bank more efficient to drive better shareholder returns.
Bank of Nova Scotia could decide to monetize non-core assets in the international business and potentially invest in new markets. The bank has operations in Mexico, Chile, Peru, and Colombia. Mexico is expected to remain strategically important, but the bank might decide to sell the businesses in the other three Latin American countries.
Bank of Nova Scotia continues to be very profitable and has an adequate capital cushion to ride out some tough times. The board raised the dividend when the bank released the fiscal second-quarter (Q2) 2023 results, so there doesn’t appear to be much concern about the profit outlook.
BNS stock trades for close to $64 at the time of writing compared to more than $90 in early 2022. Investors who buy the dip can get a 6.6% dividend yield.
TC Energy
TC Energy (TSX:TRP) recently announced plans to spin off the oil pipeline business to focus on power generation and natural gas transmission. The decision follows the recent $5.2 billion monetization of some U.S. assets and comes as the company works to finish its Coastal GasLink pipeline project, which is way over budget. Now more than 90% complete, Coastal GasLink will cost at least $14.5 billion, which is more than double the initial estimates. The pipeline will transport natural gas from producers to a new liquified natural gas (LNG) export terminal being built on the coast of British Columbia.
In total, TC Energy has $34 billion capital program on the go. The Coastal GasLink setbacks are frustrating, but the stock looks oversold at this point. Management expects to deliver annual dividend growth of at least 3% over the medium term, supported by cash flow expansion as new assets go into service. At the current share price near $49, investors can get a 7.6% dividend yield.
The bottom line on top oversold TSX dividend stocks
BCE, Bank of Nova Scotia, and TC Energy all pay attractive dividends that should continue to grow. If you have some cash to put to work, these stocks look cheap today and deserve to be on your radar.
