Canadian savers are using their self-directed Registered Retirement Savings Plan (RRSP) and Tax-Free Savings Account (TFSA) to create investment portfolios that will generate decent retirement income to go along with company and government pensions.
The market correction over the past year is giving investors an opportunity to buy top TSX dividend stocks at discounted prices. Buying on dips takes courage, but investors get a higher yield on the initial investment, and the upside potential on a rebound can deliver attractive total returns over time.
Telus
Telus (TSX: T) recently announced plans to trim its workforce by about 6,000 to adjust to a slowdown in revenue at its Telus International subsidiary and to ensure the overall business continues to operate efficiently, as borrowing costs rise due to the sharp hike in interest rates. The stock currently trades below $23 compared to more than $34 at the peak last year.
Despite some near-term headwinds, Telus still expects to deliver solid 2023 results. The core mobile and internet subscription businesses continue to grow after Telus completed its copper-to-fibre transition and is expanding its 5G mobile network. Consolidated operating revenue is projected to increase by 9.5% to 11.5% in 2023. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) should be 7-8% higher than 2022.
Telus has increased the dividend annually for more than 20 years. Investors who buy the stock at the current level can get a 6.3% dividend yield.
Fortis
Fortis (TSX: FTS) increased its dividend in each of the past 49 years. Management intends to boost the payout by 4-6% annually through at least 2027, supported by the current $22.3 billion capital program that will increase the rate base by about a third over a five-year period.
This is the kind of dividend-growth guidance investors like to see when there is a potential recession on the horizon.
Fortis owns about $64 billion in assets, serving 3.4 million electricity and natural gas customers in Canada, the United States, and the Caribbean. The businesses include rate-regulated power-generation facilities, electricity transmission networks, and natural gas distribution utilities. These provide essential services that homes and companies need, regardless of the state of the economy.
Fortis trades near $53.50 at the time of writing compared to $65 at the high last year. The drop appears overdone, even as rising interest rates increase borrowing costs to finance part of the capital program.
Investors who buy Fortis stock can get a 4.25% dividend yield right now. This is lower than the yield available from other stocks, but the reliable dividend growth and the track record of share-price appreciation make Fortis a good candidate for an anchor pick in a retirement fund.
The bottom line on top TSX stocks for RRSP and TFSA investors
Telus and Fortis are good examples of top TSX dividend stocks that pay attractive and growing dividends. If you have some cash to put to work in a self-directed RRSP or TFSA, these stocks look cheap today and deserve to be on your radar.
