Canadian investors who missed the rally this year in the TSX are wondering which top Canadian dividend stocks might still be undervalued and good to buy for a self-directed Registered Retirement Savings Plan (RRSP) portfolio focused on dividends and total returns.
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TD Bank
TD (TSX:TD) is a contrarian pick right now. The stock took a beating in the past year as investors worried about the impact of regulatory investigations in the United States related to a lack of adequate systems for identifying and preventing money laundering at TD’s American operations.
The bulk of the process is now complete. TD is required to pay roughly US$3 billion in penalties and will have a cap placed on its U.S. assets. In addition, the American business will be monitored for the next three or four years.
The $3 billion fine wasn’t a surprise. TD had already booked provisions for this amount earlier this year. Investors are concerned, however, about the restriction on growth. TD spent billions of dollars over the past two decades to acquire U.S. regional banks from Maine right down the east coast to Florida. With U.S. expansion on hold, the bank will have to find other growth opportunities.
Near-term headwinds will likely persist for the stock. Patient RRSP investors with a contrarian investing style, however, might consider nibbling at the current level. TD trades near $78 per share at the time of writing compared to $108 in early 2022. Investors can currently get a 5.2% dividend yield, so you get paid well to wait for the recovery.
Enbridge
Enbridge (TSX:ENB) recently wrapped up its US$14 billion purchase of three natural gas utilities in the United States. The deals further diversify the revenue stream and will make Enbridge the largest operator of natural gas utilities in North America. These assets, combined with the extensive natural gas transmission networks the company operates in Canada and the United States, should position Enbridge to benefit from the anticipated surge in natural gas demand that could come from gas-fired power generation facilities being considered to run AI data centres.
Enbridge has also expanded into oil exports and is a partner on the Woodfibre liquified natural gas (LNG) facility being built in British Columbia. The oil pipelines remain strategically important for the energy industry and Enbridge has a growing renewables business. Oil and natural gas exports could surge in the coming years as countries turn to North American suppliers for reliable supplies. At the same time, Enbridge’s wind and solar division should benefit from the ongoing transition to renewable energy.
The current $24 billion capital program, along with the revenue bump from the acquired assets, should support dividend growth. Investors who buy ENB stock at the current price can get a dividend yield of 6.3%.
The bottom line on RRSP stocks
TD and Enbridge are TSX giants with long track records of delivering solid total returns for buy-and-hold investors. If you have some cash to put to work in a self-directed RRSP, these stocks deserve to be on your radar.
