3 Oversold Stocks to Buy Before They Bounce Back

These top TSX dividend stocks look cheap today.

| More on:
falling red arrow and lifting

Image source: Getty Images

A correction in the share prices of top Canadian dividend stocks over the past year is giving investors who missed the rally off the 2020 crash a new chance to buy great TSX dividend stocks at discounted prices for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP).


CIBC (TSX:CM) trades near $54 per share at the time of writing compared to more than $80 in early 2022.

The decline over the past 18 months has coincided with the increase in interest rates in Canada and the United States, as the central banks in the two countries try to get inflation under control. Rising interest rates are typically good for banks, as they can boost net interest margins. However, the steep increase over such a short timeframe has investors worried that the central banks will trigger a severe recession and set off a wave of loan defaults.

In CIBC’s case, the bank has a high relative exposure to the Canadian residential housing market due to its large mortgage portfolio. CIBC raised its provision for credit losses (PCL) in the fiscal third quarter (Q3) of 2023 due to increased risks of defaults caused by the rate hikes. If interest rates continue to move higher or stay elevated for too long, home and condo owners could be forced to sell their properties. In the event there is a surge in listings, and property prices plunge, CIBC would likely take a larger hit than its Canadian peers.

That being said, the general expectation among economists is that a recession will be short and mild if one occurs. CIBC finished fiscal Q3 2023 with a common equity tier-one (CET1) ratio of 12.2%. This is above the 11.5% regulators will require the banks to have before the end of this year, so CIBC has adequate capital to ride out some tough times.

The board raised the dividend earlier this year. Investors who buy CM stock at the current level can get a 6.4% dividend yield.


Telus (TSX:T) trades near $23.50 at the time of writing compared to more than $34 at the 2022 peak. The drop is largely due to the surge in interest rates. Telus uses debt as part of its funding strategy for its capital programs. Higher borrowing costs put a dent in profits and can reduce cash available for distributions.

Weaker revenue at Telus International, a subsidiary that provides global firms with IT and multi-lingual customer care services, will impact 2023 results. Telus recently reduced guidance for the year, but the company still expects to see decent growth in consolidated operating revenue and in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).

As such, the pullback in the share price looks overdone. Investors who buy Telus stock at the current price can get a 6.2% dividend yield.

TC Energy

TC Energy (TSX:TRP) trades near $49.50 at the time of writing. The stock topped $70 in June of last year. Again, rising interest rates are making debt more expensive. Energy infrastructure projects take years to build and cost billions of dollars. A jump in borrowing costs puts pressure on margins and profitability.

TC Energy has also struggled with soaring expenses on its Coastal GasLink project, which will cost more than double the initial budget. The project is 90% complete, so the bulk of the hit should be in the rearview mirror.

Despite the headwinds, TC Energy expects its $34 billion capital program to generate enough cash flow growth to support annual dividend increases of 3-5% in the next few years. Investors who buy the pullback can now get a 7.5% dividend yield from TRP stock.

The bottom line on cheap TSX stocks

Ongoing volatility should be expected, but CIBC, Telus, and TC Energy look cheap at current prices and pay attractive dividends that should continue to grow. If you have some cash to put to work, these stocks 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 TELUS and Telus International. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker owns shares of Telus.

More on Investing

Growth from coins
Stocks for Beginners

This Growth Stock Is Bound for Greatness With Lifelong Income

GFL (TSX:GFL) stock has already made an impact on the market, but there could be even more coming its way.

Read more »

Senior Couple Walking With Pet Bulldog In Countryside
Dividend Stocks

Pensioners: 2 Cheap TSX Dividend Stocks to Buy Today for TFSA Passive Income

Hold cheap dividend stocks in a TFSA such as Canadian Western Bank and earn a steady stream of passive income.

Read more »

analyze data
Dividend Stocks

Telus Stock: Keep Your Eye on the Prize

Telus (TSX:T) stock is one of the highest-yielding telcos in Canada.

Read more »

potted green plant grows up in arrow shape
Tech Stocks

The Ultimate Growth Stocks to Buy With $300 Right Now

Growth stocks are on the rise. Here are three top companies to load up on before they return to all-time…

Read more »

A worker gives a business presentation.

Here’s Why Telus International Could Get a Boost in September

Here's why long-term investors may want to consider investing in Telus International (TSX:TIXT) stock in September, given its catalysts.

Read more »

Man making notes on graphs and charts
Energy Stocks

Is Suncor Stock Still Cheap?

Suncor is moving higher. Is it time to buy?

Read more »

consider the options
Energy Stocks

EV Stocks vs. Battery Metal: Which Green Investment Should You Choose?

Look closely at these two TSX stocks if you’re looking for assets that give you exposure to investing in a…

Read more »

value for money

3 Stocks You’ll Be Glad You Bought at These Prices

Canadians should be hunting for discounts in a volatile market, and stocks like Canadian Tire (TSX:CTC.A) are my top targets.

Read more »