2 Top TSX Dividend Stocks That Still Look Oversold

These seemingly oversold TSX dividend stocks have the potential to outperform the broader market and yield outstanding returns on investments in the long run.

| 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

The Bank of Canada’s decision to cut interest rates in the last two meetings has driven the TSX Composite benchmark to new heights. The central bank’s latest policy moves have boosted the Canadian stock market, especially the sectors that benefit from lower borrowing costs and higher consumer spending. However, despite the overall market upswing, some dividend-paying stocks on the Toronto Stock Exchange still appear undervalued or oversold based on their long-term fundamentals and future earnings potential. In addition, such dividend stocks right now have generous yields.

Here are two top TSX dividend stocks that still look oversold but could deliver strong long-term returns.

Magna International stock

Even though many TSX stocks are trading close to their all-time highs right now, Magna International (TSX:MG) hasn’t seen much appreciation of late, as it’s currently nearly 33% off its 52-week high. This Aurora-headquartered auto parts and mobility company currently has a market cap of $15.6 billion as its stock trades at $54.36 per share with 30.6% year-to-date losses. Nevertheless, MG stock offers an attractive 5% annualized dividend yield at this market price.

Created with Highcharts 11.4.3Magna International PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

The recent declines in Magna stock could be attributed to its weak financial performance due mainly to the ongoing macroeconomic woes. In the quarter ended in June 2024, the company’s total revenue remained nearly flat on a YoY (year-over-year) basis at around US$11 billion. Higher warranty costs, foreign exchange headwinds, and reduced earnings from lower assembly volumes drove its adjusted earnings down by 10% YoY for the quarter to US$1.35 per share, missing Street analyst expectations of $1.44 per share.

Although slower-than-expected penetration of electric vehicles and other economic factors have affected Magna’s financial growth in recent quarters, its continued investments in emerging automotive technologies, including advanced driver-assistance systems, strengthen this TSX dividend stock’s long-term growth outlook. Considering this, it could be the right time for long-term investors to buy this seemingly oversold dividend stock at a bargain right now.

Algonquin Power & Utilities stock

Algonquin Power & Utilities (TSX:AQN) could be another strong dividend stock to buy on the dip right now. This Oakville-based diversified utilities company currently has a market cap of $5.4 billion as its TSX-listed stock trades at $7 per share after sliding by 16.3% so far in 2024. Just like Magna, AQN stock also offers a 5% annualized dividend yield at the current market price.

In the June quarter, a weakness in its regulated services group drove Algonquin’s total revenue down by 4.7% YoY to US$598.6 million. Despite lower revenue, however, the company’s adjusted quarterly net profit jumped by a solid 16% YoY to US$65.2 million, also exceeding Street analysts’ expectations of US$60.1 million, with strong performances in both its regulated services and renewable energy groups. Similarly, it also managed to reduce its long-term debt by roughly 3% from a year ago to $8.3 billion.

Overall, Algonquin management’s continued focus on improving regulated utility operations, coupled with its sensible capital expenditure plans, brightens its long-term growth outlook and makes it a reliable TSX dividend stock to buy now.

Should you invest $1,000 in Algonquin Power and Utilities right now?

Before you buy stock in Algonquin Power and Utilities, 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 Algonquin Power and Utilities 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 Magna International. The Motley Fool has a disclosure policy. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.

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

stock research, analyze data
Dividend Stocks

Where to Look for Value Opportunities in Canadian Stocks This Month

These stocks have great track records of dividend growth during difficult economic times.

Read more »

A worker overlooks an oil refinery plant.
Dividend Stocks

3 High-Yield Canadian Stocks I’d Consider for a $5,000 Investment

These three dividend stocks are excellent additions to your portfolio, given their healthy cash flows and high yields.

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

How I’d Use My TFSA to Invest in Canadian Value Stocks for Long-Term Wealth

TFSA investors can mitigate bearish trends by shifting to value stocks that can deliver long-term wealth.

Read more »

The TFSA is a powerful savings vehicle for Canadians who are saving for retirement.
Dividend Stocks

TFSA ‘Forever Holdings’: 4 Canadian Stocks for Sustained Tax-Free Growth

Add these four TSX dividend stocks to your self-directed TFSA portfolio to generate tax-free passive income for decades.

Read more »

Beware of bad investing advice.
Dividend Stocks

Where I’D Invest $1,000 in 3 No-Brainer Canadian Stocks Under $150

Want to invest $1,000 in some great stocks? Here's a trio that investors can buy at a discount right now…

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

The 1 Canadian Stock I’d Buy and Hold Forever in a TFSA

This Canadian stock is a strong option for any TFSA, and here's why.

Read more »

Man holds Canadian dollars in differing amounts
Dividend Stocks

Invest $25,000 in These Dividend Stocks for $1,267 in Annual Passive Income

Dividend stocks are strong options, but these two could be some of the best long-term options.

Read more »

investor looks at volatility chart
Dividend Stocks

I’m Adding This 12% Dividend Stock for a Recession-Resistant Portfolio

Despite boasting such a high dividend yield, this 12% dividend yield stock might be an excellent pick to build your…

Read more »