Top Canadian Dividend Stocks to Own for 20 Years

These great TSX dividend stocks look oversold.

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The pullback in the share prices of some of Canada’s largest companies and best dividend payers is giving investors who missed the rally off the 2020 market crash another opportunity to buy great TSX dividend stocks at discounted prices for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio.

TD Bank

TD (TSX:TD) is a giant in the Canadian financial sector with a current market capitalization of nearly $138 billion. The stock trades close to $76 per share at the time of writing. This is the lowest the stock has been since early 2021 and way off the $108 the share price hit in the first quarter of 2022.

TD abandoned its planned US$13.4 billion takeover of First Horizon this year, citing regulatory hurdles. The decision likely came as a relief to investors who had watched First Horizon’s share price drop to US$15 in March this year, well below the US$25 per share TD had originally agreed to pay. Bank failures in the U.S. earlier this year have weighed on bank stocks as investors take a cautious approach until there is clarity on the endpoint for interest rate hikes. First Horizon currently trades near US$10 per share.

TD had to cut its guidance for earnings growth after it cancelled the deal. However, the bank is now sitting on significant excess capital that will enable TD to ride out any ongoing market turbulence. TD intends to take a more organic approach to grow the American operations in the coming years.

The bank remains very profitable, even in these challenging times, and now offers a dividend yield of 5%. Buying TD stock on big dips has historically turned out to be a profitable move for patient investors.

TC Energy

TC Energy (TSX:TRP) trades below $47 per share at the time of writing compared to a high of around $74 in 2022. The drop is largely due to the impact of soaring interest rates on the company’s cost of borrowing. TC Energy uses debt to fund a portion of its growth plan. As rates increase, the company has to allocate more cash to service variable-rate debt or has to pay more to borrow additional fixed-rate funds.

A major project has also run into problems in the past few years, putting pressure on the balance sheet. TC Energy’s Coastal GasLink project is expected to cost at least $14.5 billion. That’s more than double the initial budget. The pipeline is 98% complete as of the last update, so the worst of the news should be in the rearview mirror. Management had to monetize some assets to raise cash this year, and the company is planning to spin off the oil pipelines business to raise additional funds.

Looking ahead, TC Energy still expects the $34 billion capital program to generate adequate revenue and cash flow growth to support planned dividend increases of 3% to 5% per year. TC Energy has increased the payout annually for more than two decades. Investors who buy the pullback can now get a dividend yield of 7.9%.

The bottom line on top Canadian dividend stocks

TD and TC Energy are good examples of TSX dividend stocks paying attractive distributions that should continue to grow. If you have some cash to put to work in a TFSA or RRSP, these stocks look cheap 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 has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker has no position in any stock mentioned.

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