Canadians with contribution room in their self-directed Registered Retirement Savings Plan (RRSP) portfolios are wondering which top TSX dividend stocks are still trading at reasonable prices and might be good to buy for a portfolio targeting dividends and total returns.
Fortis
Fortis (TSX:FTS) just increased its dividend by 4.2%. This is the 51st consecutive year the board has given investors a raise. Steady dividend hikes tend to support a rising stock price over time, especially when the increases are driven by revenue growth and higher cash flow.
Fortis is working on a $26 billion capital program that will boost the rate base from about $39 billion in 2024 to $54 billion in 2029. As new assets are completed and go into service there should be a boost to cash flow to support planned annual dividend increases of 4% to 6% over the next five years. That’s the kind of guidance RRSP investors want to see for their buy-and-hold portfolios.
Fortis has other capital projects under consideration that could get the green light as interest rates decline in Canada and the United States. The company also has a good track record of making strategic acquisitions. A new wave of consolidation in the energy infrastructure sector could be on the way in the next few years. Fortis could either be a buyer or potentially become a takeover target for large alternative asset management funds seeking businesses with reliable cash flows.
Investors who buy Fortis at the time of writing can get a dividend yield of 4%.
Enbridge
Enbridge (TSX:ENB) is up nearly 30% in the past year. The rebound has recovered most of the losses the stock incurred through the end of 2022 and much of 2023 when the Bank of Canada and the U.S. Federal Reserve aggressively increased interest rates to get inflation under control. As soon as the market started to price in rate cuts for 2024, Enbridge began to attract bargain hunters.
With the central banks now cutting rates, Enbridge will benefit from reduced borrowing expenses. The company uses debt to fund part of its growth program, which includes acquisitions and development projects. Enbridge completed its US$14 billion purchase of three natural gas utilities in the United States this year. The company also has a $24 billion capital program that will drive additional revenue growth. Management is doing a good job of diversifying the revenue stream with the expansion into energy exports and renewables in recent years. The core oil and gas transmission pipeline infrastructure remains strategically important for the Canadian and U.S. economies.
Enbridge raised the dividend in each of the past 29 years. Investors who buy the stock at the current price can get a dividend yield of 6.4%.
The bottom line on top dividend stocks for RRSP investors
Near-term volatility should be expected after the big rally in the TSX this year. However, Fortis and Enbridge are good examples of TSX stock paying attractive dividends that should continue to grow. If you have some RRSP cash to put to work, these stocks deserve to be on your radar.
