Canadian investors are looking for deals to buy for their self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) heading into 2024.
Top TSX dividend stocks pulled back through much of 2023 as interest rates soared. Bargain hunters started buying in October and the recent rebound could extend well into next year if bets on rate cuts turn out to be correct.
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TC Energy
TC Energy (TSX:TRP) had a rough run over the past year and a half. The stock slipped from $74 in June 2022 to $45 in early October 2023.
At the time of writing, the stock is back up to $51.50 but could rally much higher.
TC Energy’s troubled Coastal GasLink pipeline has finally reached mechanical completion. The estimated $14.5 billion price tag is more than double the original budget. TC Energy was hit by a variety of issues on the project in the past few years, ranging from pandemic and weather delays to soaring material costs and disputes with contractors.
A good chunk of management’s efforts in 2023 focused on shoring up the balance sheet. TC Energy sold a stake in some U.S. assets for $5.3 billion and is on track to spin off the oil pipelines business next year. Other monetization efforts are under consideration, as the company progresses the rest of the capital program.
Despite the tough times, TC Energy says its overall asset portfolio has performed well this year, and financial results should be near the top of the original guidance. Comparable earnings before interest, taxes, depreciation, and amortization (EBITDA) will be up by about 8% in 2023 and should rise by another 5% to 7% next year.
Investors who buy TRP stock at the current level can get a 7.2% dividend yield. TC Energy has increased the payout annually for more than 20 years.
Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS) cut 3% of its staff this year as part of a restructuring effort driven by the new chief executive officer. Markets will get more details about the updated strategic plan at the December 13th investor day. Many new people are already in several executive positions, and there is speculation among pundits that Bank of Nova Scotia could overhaul the international business.
The bank has large operations in Mexico, Peru, Chile, and Colombia. These countries form the core of the Pacific Alliance trade bloc that enables the free movement of goods, labour, and capital among the members. The idea has always been that the underbanked cumulative population of more than 230 million across the four markets offers attractive growth potential as the middle class expands.
That might be true, but investors haven’t reaped the rewards yet. Canada’s other large banks have focused on the United States in recent years, and their shareholders have enjoyed better returns.
Bank of Nova Scotia generated decent profits in fiscal 2023 and expects results to be a bit better next year, despite the economic headwinds caused by high interest rates. Markets still aren’t excited. At the current price near $60 per share, BNS stock isn’t far off the $55 low for the year and still looks cheap. It was as high as $93 in early 2022. Investors who buy now can get a 7% dividend yield.
The bottom line on top stocks to buy for 2024
Ongoing volatility is expected in the market next year. However, 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 TFSA or RRSP, these stocks look undervalued right now and deserve to be on your radar.
