The pullback in the TSX is giving investors who missed the rally after the 2020 market crash a new opportunity to buy top Canadian dividend stocks at discounted prices for a self-directed Registered Retirement Savings Plan (RRSP) targeting total returns.
Fortis
Fortis (TSX:FTS) just reported solid third-quarter (Q3) 2023 results. The company generated net earnings of $394 million, or $0.81 per share, compared to $326 million, or $0.68 per share, in the same period last year.
Fortis is on track to invest $4.3 billion this year on growth initiatives. The company’s $25 billion capital program through 2028 is expected to increase the rate base from $36.8 billion in 2023 to $49.4 billion by the end of 2028. This works out to a compound annual growth rate of about 6.3%. The resulting increase in revenue and cash flow is expected to support planned dividend hikes of 4-6% per year over the next five years.
Fortis stock trades near $55 per share at the time of writing compared to $65 at one point last year.
Investors who buy Fortis at the current price can get a yield of 4.3%. The board has increased the dividend in each of the past 50 years, so the guidance on dividend growth should be solid.
Fortis gets nearly all of its revenue from rate-regulated utility assets, including power generation, electric transmission, and natural gas distribution businesses. These provide essential services that homes and companies need, regardless of the state of the economy.
BCE
BCE (TSX:BCE) trades for close to $51 at the time of writing compared to $65 earlier this year and more than $73 at one point in 2022.
The steep decline is likely due to concerns that rising interest rates are driving up debt costs and putting pressure on profits. BCE uses debt to fund part of its capital program, which is quite significant. The company invested roughly $5 billion last year on projects that include the 5G network and the rollout of fibre-optic lines to the building of its customers. These are large investments, but they should drive long-term revenue growth and support BCE’s competitive position in the Canadian communications market.
BCE’s media business is under pressure amid falling ad revenue in the radio and television segments. The company trimmed staff this year to adjust to the challenging market conditions.
Overall, however, BCE still expects to deliver revenue growth and free cash flow growth in 2023, driven by strength in the mobile and internet businesses. That should support the dividend. BCE has raised the distribution by at least 5% in each of the past 15 years. At the time of writing, investors can get a 7.6% dividend yield from BCE stock.
The bottom line on top RRSP stocks
Fortis and BCE pay attractive dividends that should continue to grow. If you have some cash to put to work in a self-directed RRSP, these stocks deserve to be on your radar.
