RRSP Investors: 2 Cheap High-Yield Stocks to Buy for Total Returns

These stocks offer attractive yields and significant potential upside.

| More on:
Increasing yield

Image source: Getty Images

The latest leg of the market correction is giving Canadian investors another chance to buy top TSX dividend stocks at discounted prices for a self-directed Registered Retirement Savings Plan (RRSP) portfolio targeting total returns.

Buying stocks when they are out of favour requires some patience. Cheap stocks can get cheaper before they bounce. However, the contrarian strategy can boost long-term results by harnessing higher dividend yields and benefitting from capital gains when the market recovers.


CIBC (TSX:CM) trades for close to $51 per share at the time of writing. That’s close to the 12-month low and way down from more than $80 at the peak in 2022.

The decline has come as a result of the rise in interest rates in Canada and the United States over the past two years. High inflation forced the Bank of Canada and the U.S. Federal Reserve to act aggressively to try to cool off the economy and bring the labour market back into balance. Inflation in Canada dropped from 8% at the high point in 2022 to 4% in August, but there is work to do before it gets down to the 2% target.

High interest rates usually help banks by boosting net interest margins, but the steep increase over such a short time is making life difficult for borrowers with too much debt. Companies and households that binged on cheap loan rates are being forced to pay a lot more than they had anticipated. Each increase in interest rates has an immediate impact on variable-rate borrowers. Fixed-rate loans are protected until they mature, but most fixed-rate mortgages in Canada are for five years or less.

CIBC and its peers are already raising their provisions for credit losses (PCL). The trend is expected to continue as long as rates remain at elevated levels.

That being said, the pullback in CM stock likely already has the shares priced for a meaningful economic downturn. For the moment, the consensus expectation among economists appears to be for a short and mild recession in Canada and the United States as the central banks fight to get inflation under control. The housing market is holding up well due to low supply and robust demand, even at higher borrowing costs.

CIBC remains very profitable and has a decent capital cushion to ride out a downturn. The board increased the dividend earlier this year, so there doesn’t seem to be too much concern about the profit outlook. Investors who buy CM stock at the current level can get a 6.8% dividend yield.


Enbridge (TSX:ENB) recently announced a US$14 billion deal to buy three natural gas utilities in the United States. The company’s natural gas transmission infrastructure already moves 20% of the natural gas used by Americans, so the purchases put Enbridge in a good position to benefit from the anticipated transition to hydrogen as a fuel supplied through natural gas infrastructure.

Enbridge already has natural gas utilities in Canada that serve millions of customers. The combination of these assets with the new ones south of the border will make Enbridge the largest natural gas utility in North America. Utility businesses generate reliable rate-regulated revenue streams that should be steady, regardless of the state of the economy.

Enbridge’s oil pipeline assets remain important, along with the export facilities and the growing renewable energy portfolio.

The new assets, along with a robust capital program, should drive revenue and cash flow growth to support the dividend. Enbridge increased the payout in each of the past 28 years. The stock is down to about $44 from $59 last year. At the current level, investors can get a dividend yield of 8%.

The bottom line on top dividend stocks

CIBC and Enbridge 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 oversold today and 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 Enbridge. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker owns shares of Enbridge.

More on Dividend Stocks

Payday ringed on a calendar
Dividend Stocks

3 Top TSX Passive-Income Stocks That Pay Out Every Month

Here are some of the best TSX stocks for passive monthly income. Investors should explore to see if they're a…

Read more »

edit Sale sign, value, discount
Dividend Stocks

3 Remarkably Cheap TSX Stocks to Buy Right Now

These three cheap TSX stocks are some of the best buys on the TSX, and yet their share price is…

Read more »

think thought consider
Dividend Stocks

This Dividend Stock Could Create $1,353 in Passive Income in 2024

This dividend stock can create massive passive income from two sources, so don't miss out before a recovery in 2024!

Read more »

Increasing yield
Dividend Stocks

TFSA Investors: Buy This Top Bank Stock for High-Yielding Dividends

Generate a superior passive-income stream by investing in this high-yielding dividend stock from Canada’s Big Six banks.

Read more »

grow money, wealth build
Dividend Stocks

2 of the Best TSX Dividend Stocks I Plan on Holding Forever

High-yield TSX dividend stocks, such as Enbridge, offer you tasty yields and trade at significant discounts to consensus price targets.

Read more »

Family relationship with bond and care
Dividend Stocks

TFSA Investors: 3 Cheap Canadian Stocks for Retirees

These three Canadian stocks are super cheap for retirees looking for a great buy that will last the test of…

Read more »

calculate and analyze stock
Dividend Stocks

CPP Disability Benefits: Here’s How Much You Could Get

Not everybody can get CPP disability benefits. If you want some passive income, consider investing in Royal Bank of Canada…

Read more »

growing plant shoots on stacked coins
Dividend Stocks

Boosting Your Monthly Income: TSX Stocks That Deliver

Dividend investing can boost regular or active incomes, especially select TSX stocks that pay monthly dividends.

Read more »