Canadians with some cash to put to work in a self-directed Tax-Free Savings Account (TFSA) or a Registered Retirement Savings Plan (RRSP) are wondering which top TSX stocks are still undervalued and good to buy heading into 2024.
Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS) recently reported fiscal fourth-quarter (Q4) 2023 results that came in a bit worse than analysts had anticipated. The company significantly increased its provision for credit losses (PCL) compared to the previous quarter and said that fiscal 2024 earnings will likely be just slightly higher than 2023.
The share price initially slipped on the news but recovered the lost ground in the next couple of days. However, BNS stock still only trades near $60 at the time of writing, compared to more than $90 in early 2022.
The big PCL number and other expenses linked to staff cuts and a write-down on an investment in China might be a case of getting all the bad stuff off the books all in one sweep in order to head into fiscal 2024 with a clean slate. The new chief executive officer who took over in early 2023 has already put new people in several executive positions, and Bank of Nova Scotia is expected to announce a strategic shift at the December 13th investor meeting.
BNS stock has underperformed the other large Canadian banks in recent years. This makes it a contrarian pick right now, but the upside potential is significant if the new management team can turn things around. In the meantime, investors can collect a solid 7% dividend yield while they wait.
TC Energy
TC Energy (TSX:TRP) is another company that had a rough run over the past year. The company finally reached mechanical completion on its 670 km Coastal GasLink pipeline, which had struggled through pandemic delays, soaring material costs, and bad weather. The final cost for the pipeline is expected to be around $14.5 billion. This is more than double the original budget.
Management made good progress in 2023 on rebuilding the cash position and reducing debt. TC Energy raised $5.3 billion through the sale of an interest in some American assets. The company is eyeing another $3 billion in monetization next year and is on track to spin off the oil pipelines division into a separate company.
TC Energy’s share price is near $51 at the time of writing. The stock topped $70 at the high point in 2022. Investors who buy at the current level can get a 7.3% dividend yield.
TC Energy says it will deliver financial results at the top end of its guidance this year, despite all the challenges. The ongoing capital program is expected to support annual dividend increases of at least 3% over the medium term.
The bottom line on top TSX stocks to buy in December
Bank of Nova Scotia and TC Energy 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.
