Investors with cash on the sidelines are searching for top TSX dividend stocks that might be good to buy on the next correction. Buying stocks on dips takes courage and the patience to ride out turbulence, but the strategy can deliver better yields and higher returns over the long haul.
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Fortis
Fortis (TSX:FTS) trades near $61.50 at the time of writing. The stock is up about 13% this year but is still below the $65 it reached in 2022 before the Bank of Canada and the U.S. Federal Reserve started to aggressively raise interest rates to get inflation under control.
Fortis and other utilities use debt as part of their financing strategy to fund growth projects. A jump in interest rates drives up borrowing expenses. This can lead to lower profits and less cash available to pay dividends.
Most of this year’s stock gain occurred in the last four months. This has coincided with rate cuts by the central banks. Looking ahead, more rate reductions are expected in Canada as the government tries to avoid causing a recession. South of the border, the economy remains in good shape, so the U.S. Fed might not lower rates as quickly as expected. Inflation could also start to move higher again in 2025, depending on the trade policies that get put in place by the new Trump administration.
Fortis recently raised its dividend by 4.2%. This is the 51st consecutive year the board has given investors a dividend increase. Fortis has a $26 billion capital program on the go that is expected to boost the rate base enough over five years to support planned annual dividend increases of 4% to 6% through 2029.
Buying Fortis on dips has historically proven to be a savvy move for patient investors. At the time of writing, FTS stock provides a yield of 4%.
Enbridge
Enbridge (TSX:ENB) has increased its dividend for 29 consecutive years, and more gains should be on the way. The energy infrastructure giant completed a US$14 billion purchase of three American natural gas utilities this year and is working on a $24 billion capital program to drive additional growth. Cash flow from the new assets should support ongoing dividend increases.
Enbridge has done a good job of diversifying its assets in recent years by expanding into export terminals and renewable energy and adding more utilities to complement the core oil and natural gas transmission networks. Enbridge’s pipelines remain critical to the smooth operation of the Canadian and U.S. economies by moving about 30% of the oil produced in the two countries and roughly 20% of the natural gas used by American homes and businesses.
Enbridge’s share price is up 29% in the past 12 months and now trades near the high point of 2022 before rate hikes sent it into an extended decline. Investors who buy at the current level can still get a decent 6.1% dividend yield.
The bottom line on top TSX dividend stocks
Fortis and Enbridge pay attractive dividends that should continue to grow. If you are putting a list together for stocks to buy on a dip, these two deserve to be on your radar.
