RRSP Pension: 2 Dividend Stocks to Buy on the Latest Dip

These high-yield TSX stocks look cheap right now for RRSP investors.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Canadian savers who missed the rally off the 2020 market crash are getting another chance to buy great Canadian dividend stocks at undervalued prices for a self-directed Registered Retirement Savings Plan (RRSP) focused on high yields.

Bank of Nova Scotia

Bank of Nova Scotia (TSX:BNS) trades near $63.50 per share compared to $93 in early 2022. The stock actually fell as low as $55 last fall. Bargain hunters who bought BNS stock at that point are already sitting on decent gains, but more upside should be on the way.

Created with Highcharts 11.4.3Bank Of Nova Scotia PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

The Bank of Canada recently cut interest rates in a signal to the market that the central bank is comfortable with the downward inflation trend. Focus is now shifting to the avoid a hard landing for the economy.

Bank of Nova Scotia and its peers have increased provisions for credit losses (PCL) considerably in recent quarters as the sharp rise in interest rates started putting pressure on businesses and households that are carrying too much debt. The 0.25% drop in interest rates will immediately help holders of variable-rate loans. At the same time, the resulting decline in bond yields should bring some relief to those who need to renew fixed-rate mortgages in the coming months. The Bank of Canada is expected to continue reducing rates through next year. As a result, PCL should level off and then start to decline in the coming quarters. This should bring more investors back into the banking sector.

Bank of Nova Scotia remains very profitable despite the challenging environment. The bank generated fiscal second-quarter (Q2) 2024 adjusted net income of $2.1 billion compared to 2.16 billion in the same period last year. Staff cuts in 2023 will help buffer earnings this year, and a strategy shift to focus more on Canada, the United States, and Mexico should start to bear fruit over the medium term.

Bank of Nova Scotia has a strong capital position with a common equity tier-one (CET1) ratio of 13.2%. This means it has excess capital to ride out additional turbulence or fund potential growth initiatives. The stock looks cheap, currently trading at roughly 1.1 times book value compared to the five-year average of 1.28 times book value.

Investors who buy now can get a dividend yield of 6.7%.

Telus

Telus (TSX:T) trades near $21.50 at the time of writing, which isn’t far off the nadir of the pandemic crash. The stock rallied to $34 at the peak in 2022, so it has essentially given back all those gains.

Soaring interest rates through the back half of 2022 and most of 2023 are largely responsible for the decline in the share price over the past two years. Telus uses debt to fund part of its capital program, which includes the expansion and upgrade of its wireless and wireline networks. Higher borrowing costs reduce profits and cut into cash that is available for distribution to shareholders. Now that the Bank of Canada has started to cut interest rates, there could be a transition of funds in the coming quarters from fixed income to high-yield dividend stocks, including Telus.

The company generated a 7.4% gain in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2023 despite the interest rate headwinds and revenue declines in the Telus International subsidiary. Challenges persist, but management still expects Telus to grow adjusted EBITDA by at least 5.5% in 2024. Based on this guidance, the stock is likely oversold. Telus trades near two times book value right now compared to its five-year average of 2.48 times book.

Telus has increased the dividend annually for more than two decades. At the current share price, investors can get a 7.2% dividend yield.

The bottom line on top dividend stocks for RRSP investors

Ongoing volatility should be expected, but Bank of Nova Scotia and Telus already look cheap and pay attractive dividends that should continue to grow. If you have some cash to put to work, these stocks deserve to be on your RRSP radar.

Should you invest $1,000 in Brp Inc. right now?

Before you buy stock in Brp Inc., consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Brp Inc. wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool recommends Bank Of Nova Scotia, TELUS, and Telus International. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker owns shares of Telus.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

Dividend Stocks

3 Canadian REIT Stocks to Buy and Hold for the Next Quarter-Century

These three Canadian REITs trade cheaply and are highly reliable, making them some of the best stocks you can buy…

Read more »

A train passes Morant's curve in Banff National Park in the Canadian Rockies.
Dividend Stocks

1 Practically Perfect Canadian Stock Down 24% to Buy Now and Hold for Life!

CNR stock is a top Canadian stock for investors, especially with shares down on the TSX today.

Read more »

Canada national flag waving in wind on clear day
Dividend Stocks

The Best Canadian Stocks to Buy Right Away With $30,000

If you have $30,000 you're willing to invest, these are some of the first Canadian stocks to consider on your…

Read more »

rail train
Dividend Stocks

What to Know About Canadian Pacific Railway Stock for 2025

CP stock has now gone through a major merger, so what do investors have to look forward to?

Read more »

ways to boost income
Dividend Stocks

Top Canadian Value Stocks I’d Buy for Dividend Growth and Appreciation

If you are looking for income and capital appreciation, here are three Canadian value stocks for a great total return…

Read more »

coins jump into piggy bank
Dividend Stocks

The Smartest Canadian Stock to Buy With $2,000 Right Now

The company’s powerful combination of growth, income, and value, positions it well to deliver solid returns, making it a smart…

Read more »

Transparent umbrella under heavy rain against water drops splash background. Rainy weather concept.
Dividend Stocks

This 10.6 Percent Dividend Stock Pays Cash Every Single Month

Are you looking to invest for a rainy day? This 10.6% dividend stock pays cash every month, irrespective of the…

Read more »

A worker gives a business presentation.
Dividend Stocks

Market Dip: Opportunity or Risk This April?

This market dip might have investors worried, but should they be excited instead?

Read more »