The correction in the share prices of some great Canadian dividend stocks is giving investors who missed the rebound after the 2020 market crash a new opportunity to buy top TSX dividend payers at discounted prices for a self-directed TFSA focused on passive income or a Registered Retirement Savings Plan (RRSP) targeting total returns.
Enbridge
Enbridge (TSX:ENB) is a giant in the North American energy infrastructure industry with oil pipelines and natural gas pipelines that move 30% of the oil produced in the U.S. and Canada and 20% of the natural gas used in the United States. Investments in recent years have focused on broadening out the revenue stream. These include export opportunities, renewable energy, and natural gas utilities. Enbridge bought an oil export terminal in Texas in 2021 for US$3 billion. Last year, the company secured a stake in the Woodfibre liquified natural gas (LNG) export facility being build in British Columbia. Enbridge also purchased a developer of solar and wind projects to make sure the company benefits from energy transition opportunities. More recently, Enbridge announced a US$14 billion acquisition of three American natural gas utilities.
These investments, along with the ongoing capital program, should drive revenue and cash flow growth to support the dividend. Enbridge trades near $43.50 at the time of writing compared to $59 at the high point last year.
Investors who buy Enbridge at the current level can get a dividend yield of 8.1%.
Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS) trades near $55.50 at the time of writing compared to $93 in early 2022. The steep decline in recent weeks has taken the share price back to a level that investors have not seen in three years.
All of the large Canadian banks are out of favour amid rising fears that the Bank of Canada’s interest rate hikes have gone too far and will trigger a severe economic downturn. Provisions for loan losses are already rising. That trend will likely continue as more households are forced to renew mortgages at higher rates and businesses begin to trim staff more aggressively. If unemployment spikes while interest rates are still high, there could be some rough times ahead for the banks.
That being said, Bank of Nova Scotia is probably oversold right now. Economists broadly expected a mild and short recession to occur as inflation subsides and the Bank of Canada begins to lower interest rates. The bank remains very profitable and has a solid capital cushion to ride out some turbulence.
Investors who buy BNS stock at the current share price can get a 7.6% dividend yield.
The bottom line on top TSX dividend stocks to buy for high yields
Enbridge and Bank of Nova Scotia pay attractive dividends that should continue to grow. If you have some cash to put to work in a portfolio targeting passive income and total returns, these stocks look oversold today and deserve to be on your radar.
