The recent bounce in the share prices of many top Canadian dividend stocks could be the beginning of an extended rally. Investors who missed the recovery after the 2020 market crash have another opportunity to buy great TSX dividend stocks while they are still cheap and offer attractive yields.
TC Energy
TC Energy (TSX:TRP) trades for close to $49.50 at the time of writing compared to more than $70 at the peak in 2022.
The decline is due to problems with the Coastal GasLink pipeline project and the impact of rising interest rates. Coastal GasLink had an initial budget of around $6 billion. The final tally is expected to be at least $14.5 billion. TC Energy recently said the construction of the pipeline is now complete.
Management is building up cash to fund the rest of the $34 billion capital program. TC Energy intends to spin off the oil pipeline group into a separate business. The company already raised more than $5 billion this year on the sale of part of its American assets and is considering monetizing other holdings, including the operations in Mexico.
Despite the challenges, TC Energy still expects the capital program to generate enough revenue and cash flow growth to support planned annual dividend increases of 3-5% over the medium term. The board has increased the payout annually for more than two decades.
Investors who buy TRP stock at the current level can get a 7.5% dividend yield.
Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS) could announce some big changes to the business in the coming weeks after completing its strategic review. The chief executive officer who took over the bank at the beginning of 2023 has already put new people into several senior positions. The bank is cutting about 3% of its workforce to adjust to the current economic conditions.
Pundits speculate the bank might look to sell some of its Latin American businesses and use the funds to target growth in other markets. Bank of Nova Scotia has large operations in Mexico, Peru, Chile, and Colombia. These countries are members of the Pacific Alliance trade bloc that allows the free movement of capital, goods, and labour. Growth potential for the bank is arguably attractive in these countries as the middle class expands, but political and economic uncertainty is always a concern for investors, and Bank of Nova Scotia’s share price has underperformed its peers in recent years.
Mexico will likely remain strategically important, but that may not be the case for the other three markets.
Investors might want to start nibbling on BNS stock while it is still out of favour. The shares trade near $59 at the time of writing compared to $93 in early 2022. Even with the threat of a recession on the horizon, the stock is probably priced for a worse economic situation than is widely expected to occur.
At the time of writing, Bank of Nova Scotia provides a 7% dividend yield.
The bottom line on top TSX dividend stocks
TC Energy and Bank of Nova Scotia pay attractive dividends that should continue to grow. If you have some cash to put to work in a Tax-Free Savings Account or Registered Retirement Savings Plan, these stocks look cheap today and deserve to be on your radar.
