Registered Retirement Savings Plan (RRSP) investors can take advantage of the pullback in the market to buy top TSX dividend stocks now offering attractive yields.
Buying on dips takes courage and the patience to ride out ongoing turbulence, but the strategy can boost returns through higher yields and potential capital gains when a rebound occurs.
Bank of Nova Scotia
Bank of Nova Scotia (TSX: BNS) is Canada’s fourth-largest bank with a current market capitalization of nearly $76 billion. The shares have underperformed those of larger peers over the past five years, but the trend might change.
Bank of Nova Scotia’s new chief executive officer (CEO) is shifting the growth focus from South America to Canada, the United States, and Mexico. The operations in Peru, Chile, and Colombia still offer attractive long-term growth potential as the middle class expands, but investors have not received the anticipated benefits from the big bets on these volatile markets, which tend to be driven by political instability and heavy reliance on commodity prices.
Bank of Nova Scotia trades near $62 per share at the time of writing. The stock was as high as $93 in early 2022, so there is decent upside potential on a rebound. In the meantime, investors who buy the stock at the current level can get a 6.8% dividend yield.
Enbridge
Enbridge (TSX: ENB) trades for close to $47.50 at the time of writing. The stock was $59 two years ago before the Bank of Canada and the U.S. Federal Reserve started to aggressively raise interests rates in their battle to get inflation under control. Enbridge uses debt to fund part of its growth initiatives, including acquisitions and the capital program, so higher borrowing costs hurt profits and reduce cash that can be used to pay dividends.
The jump in interest rates is largely to blame for the decline in the share price. Interest rates are now falling in Canada and the U.S. is expected to start cutting rates later this year or in 2025. This should provide support for Enbridge’s share price going forward.
On the operational side, Enbridge is working on a $25 billion capital program and is in the process of closing its US$14 billion acquisition of three natural gas utilities. Management expects distributable cash flow to rise by 3-5% per year over the medium term. This should support annual dividend increases in the same range.
Enbridge raised the payout in each of the past 29 years. Investors who buy ENB stock at the current level can get a dividend yield of 7.7%.
The bottom line on top dividend stocks for RRSP investors
Bank of Nova Scotia and Enbridge are good examples of high-yield dividend stocks that look cheap right now for a self-directed RRSP portfolio. If you have some cash to put to work, these stocks deserve to be on your radar.
