Canadian investors who missed the rebound after the 2020 market crash have another chance to buy top TSX dividend stocks at discounted prices for a self-directed Tax-Free Savings Account (TFSA) targeting passive income or a Registered Retirement Savings Plan (RRSP) focused on total returns.
Enbridge
Enbridge (TSX:ENB) just reported solid third-quarter (Q3) 2023 results and confirmed its 2023 guidance. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 3% compared to the same period last year. Cash flow from operating activities jumped to $3.1 billion from $2.1 billion in Q3 2022. Distributable cash flow (DCF) rose slightly to $2.6 billion. Adjusted earnings slipped to $0.62 per share from $0.67 per share due to higher debt costs caused by rising interest rates.
Enbridge stock trades near $46 per share at the time of writing. It was as high as $59 at one point in 2022.
The pullback appears overdone considering the steady performance of the business and the potential for revenue and cash flow growth in the coming years, driven by acquisitions and the capital program.
Enbridge recently announced plans to acquire three natural gas utilities in the United States for US$14 billion. The purchases will combine with the existing gas distribution assets in Canada to make Enbridge the largest natural gas utility operator in North America. Enbridge continues to grow its gas utility, renewable energy, and export businesses to diversify its revenue stream and complement the oil pipelines and gas transmission assets.
Enbridge increased the dividend in each of the past 28 years. At the time of writing, investors can get a 7.7% dividend yield from ENB stock.
Bank of Montreal
Bank of Montreal (TSX:BMO) has paid a dividend every year since 1829. This is a great track record that investors should be able to rely on, even as the bank sector faces some economic headwinds.
Bank of Montreal completed its US$16.3 billion takeover of Bank of the West in early 2023 right before the failure of a couple of other California-based regional banks sent bank stocks into a free-fall that has continued through most of this year.
Investors are concerned that Bank of Montreal paid too much to buy Bank of the West. In hindsight, that might be the case, but the assets give BMO Harris Bank, the American subsidiary, a strong foothold in the California market and should help drive future growth.
Bank of Montreal raised the dividend earlier this year and still has a solid capital cushion to ride out some tough times. The stock trades near $108 at the time of writing compared to $136 in February and more than $150 in March last year, so there is decent upside potential when the bank sector rebounds. In the meantime, investors who buy BMO stock at the current level can get a decent 5.4% dividend yield.
The bottom line on top oversold dividend stocks
Enbridge and Bank of Montreal pay attractive dividends 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.
