Contrarian investors can still find great Canadian dividend stocks trading at discounted prices. Buying stocks when they are out of favour can be a bit nerve-wracking, as cheap stocks sometimes get cheaper before they recover. However, many top TSX dividend stocks now have high yields and offer a shot at meaningful capital gains on a recovery.
BCE (TSX:BCE) trades for close to $55.50 at the time of writing. That’s off the $50 it reached during the worst of the 2023 dip but is still way down from the $65 it fetched in May last year and the $74 the stock hit at the 2022 peak.
Rising interest rates are to blame for most of the pain that occurred over much of the past two years. Higher borrowing costs can put a dent in profits for businesses like BCE that have large capital programs that are partially funded using debt.
Markets now are starting to bet on rate cuts in Canada before the end of the year. If that turns out to be the case, BCE should see more upside.
The company has increased the dividend by at least 5% annually for the past 15 years. At the current share price, investors can pick up a 7% yield, so you get paid well to wait for the rate cuts to materialize.
Enbridge (TSX:ENB) is another great Canadian dividend-growth stock that fell out of favour over the past year as interest rates rose. The company’s performance, however, has been solid, and management continues to drive growth through acquisitions and development projects. Enbridge is working to finalize its US$14 billion acquisition of three natural gas utilities in the United States. In addition, the $25 billion capital program will support revenue and cash flow expansion over the coming years.
Enbridge increased the dividend by 3.1% for 2024, marking the 29th consecutive annual dividend hike. Investors who buy ENB stock at the current level can get a 7.4% yield. The stock trades near $49 compared to $59 at the high point in 2022.
TD (TSX:TD) recently pulled back after the nice rally that occurred through the end of last year. Investors who missed the late 2023 surge can take advantage of the dip to scoop up some TD stock and get a decent 5% dividend yield. TD trades for close to $81 compared to $86 a week ago. The stock was as high as $108 at the peak in 2022, so there is decent upside potential for the next recovery.
Buying TD on big corrections has historically proven to be a savvy move for patient investors. Getting a 5% dividend yield from a top bank is a nice incentive to ride out any additional turbulence that might be on the way.
The bottom line on top TSX dividend stocks
BCE, Enbridge, and TD pay attractive dividends that should continue to grow. If you have some cash to put to work in a self-directed Tax-Free Savings Account and Registered Retirement Savings Plan, these stocks still look cheap and deserve to be on your radar.