Soaring interest rates have drive up borrowing costs and are stoking fears of deep recession. The resulting market correction in top dividend stocks is giving investors who missed rebound off the 2020 crash another chance to buy great Canadian dividend stocks at discounted prices for their self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolios.
Suncor
Suncor (TSX:SU) is catching a new tailwind but is still trading well off the 2022 high and continues to lag behind its oil sands peers.
Suncor trades near $46 per share at the time of writing. The stock was around $45 shortly before the pandemic crash sent oil stocks crashing. Suncor’s oil sands peers currently trade at levels that are as much as double their prices in early 2022, so Suncor should have some decent upside potential.
A new chief executive officer took control of Suncor this year and is making changes to improve efficiency and streamline the asset base to focus on the three core businesses that have historically made Suncor a top pick in the energy patch. Suncor has increased its oil sands holdings and monetized its renewable energy and some offshore oil assets. The company decided to keep its retail business of roughly 1,500 Petro-Canada locations and has large refineries that turn crude oil into gasoline, diesel fuel, and jet fuel.
Suncor is trimming its head count as well to get costs more in line with competitors.
It will take some time to turn things around, but investors can collect a decent 4.5% dividend yield right now while they wait for the next leg of the rebound.
Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS) is priced as if the economy is headed for a major recession. This could turn out to be the case if rate hikes by the Bank of Canada and the United States Federal Reserve go too high and rates remain elevated for too long, as the central banks try to get inflation back to their 2% target.
The general sense among economists, however, is that the Canadian and U.S. economies will go through a short and mild recession.
Bank of Nova Scotia reported decent fiscal third-quarter (Q3) 2023 adjusted profits and is sitting on a solid capital cushion to help it ride out difficult times. The bank increased its provision for credit losses compared to the same quarter last year, but the overall loan book looks stable. As long as there isn’t a meltdown in commercial and residential property prices, the bank shouldn’t see significant losses emerge on mortgage defaults.
Bank of Nova Scotia trades for $64 at the time of writing compared to $93 in early 2022. Investors who buy at the current level can get a 6.6% dividend yield.
TC Energy
TC Energy (TSX:TRP) has increased its dividend every year for more than two decades. Management intends to continue to raise the payout by at least 3% per year over the medium term, supported by the $34 billion capital program.
TC Energy recently shored up its balance sheet through the $5.2 billion sale of an interest in some of its U.S. assets. The company also intends to spin off the oil pipeline business and is considering a sale of part of some Canadian assets to boost the capital position.
TC Energy trades near $49 at the time of writing compared to more than $70 at the peak in 2022. Investors can now get a 7.6% yield from TRP stock.
The bottom line on cheap TSX dividend stocks
Suncor, Bank of Nova Scotia and TC Energy pay attractive dividends and offer investors a shot at decent upside on a rebound. Ongoing volatility should be expected, but these stocks already look cheap and deserve to be on your radar.
