RRSP: 2 Rising Canadian Dividend Stocks That Still Look Cheap

These stocks could continue to move higher as interest rates decline.

| 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 rebound in the share prices of Canadian dividend stocks could extend well into next year as the Bank of Canada looks set to cut interest rates even further in an effort to avoid a recession. Investors who missed the rally so far are wondering which TSX dividend stocks might still be undervalued and good to buy for a self-directed Registered Retirement Savings Plan (RRSP) portfolio.

Bank of Nova Scotia

Bank of Nova Scotia (TSX:BNS) trades near $73 per share at the time of writing. The stock is up more than 20% in the past year but is still way off the $93 it reached in early 2022.

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

Bank stocks came under pressure when soaring interest rates in 2022 and 2023 stoked fears that a major economic downturn would have to occur for the Bank of Canada and the U.S. Federal Reserve to get inflation under control. In the worst-case scenario, higher borrowing expenses combined with a spike in unemployment would potentially trigger a wave of loan defaults by commercial and residential borrowers.

Bank of Nova Scotia has increased its provisions for credit losses (PCL) in the past few quarters to account for the stress being felt by clients with too much debt. Rate cuts should lead to lower PCL in 2025 as long as the economy sees a soft landing next year.

At the same time, staff cuts put in place last year reduced expenses, and Bank of Nova Scotia has a solid capital position to ride out any economic turbulence. Under its new strategy, the bank is focusing its growth spending on the United States, Canada, and Mexico rather than on South America. This could attract new interest in the stock from investors who avoided Bank of Nova Scotia in the past. Investors who buy BNS stock at the current level can get a dividend yield of 5.8%.

Fortis

Fortis (TSX:FTS) raised its dividend in each of the past 50 years and intends to boost the distribution by 4-6% annually through at least 2028. That’s good guidance in uncertain economic conditions.

The company owns and operates $69 billion in utility assets across Canada, the United States, and the Caribbean. Businesses include natural gas distribution utilities, power generation sites, and electricity transmission networks. Fortis is working on a $25 billion capital program that will increase the rate base from $37 billion in 2023 to $49.4 billion in 2028. This will drive cash flow growth to support the dividend hikes. Acquisitions could boost the dividend-growth outlook. Fortis hasn’t made a large acquisition in several years, but declining interest rates could lead to a new round of consolidation in the utility sector.

Fortis trades near $61 per share at the time of writing. The stock is up 20% in the past year, but is still below the $65 it reached in 2022.

The bottom line on RRSP dividend stocks

Bank of Nova Scotia and Fortis pay good dividends that should continue to grow. If you have some cash to put to work in your RRSP, these stocks deserve to be on your radar.

Should you invest $1,000 in Cargojet right now?

Before you buy stock in Cargojet, 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 Cargojet 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 and Fortis. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker has no position in any stock 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

Canadian Red maple leaves seamless wallpaper pattern
Dividend Stocks

5 Canadian Dividend Stocks to Buy and Hold for the Next 20 Years

These Canadian stocks have paid dividends for decades, making them reliable investments to generate regular passive income.

Read more »

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 »