Recent market volatility has retirees and other Tax-Free Savings Account (TFSA) investors wondering which top TSX stocks might be undervalued now and good to buy for dividends and total returns.
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Enbridge
Enbridge (TSX:ENB) trades near $59 at the time of writing compared to more than $64 earlier this month. The pullback gives investors who missed the big rally in the past year a chance to buy ENB stock on a nice dip.
Enbridge is working on a $26 billion capital program to boost revenue in the coming years to complement the bump it is getting from recent acquisitions. Distributable cash flow is expected to rise at an annual pace of about 3% over the near term. This should support dividend growth in the same range. Enbridge raised the distribution in each of the past 30 years. Investors who buy ENB stock at the current level can get a dividend yield of 6%.
Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS) surged from $62 in August to $80 at the end of November. The stock then gave back nearly all the gains before the latest spike. Investors who missed the big rally last year can now get BNS stock at a discount again and pick up a solid 6.4% dividend yield.
The new chief executive officer (CEO) is refocusing growth investments on the United States and Canada and away from Latin America, where previous management spent billions of dollars to acquire banks and credit card portfolios to bet on a rising middle class in countries including Colombia, Chile, Mexico, and Peru, among others. The bank recently sold its assets in Colombia, Costa Rica, and Panama. More divestitures could be on the way.
It will take time for the turnaround efforts to produce results, but investors get paid well to wait.
Suncor
Suncor (TSX:SU) is another turnaround stock to watch. The oil sands giant took a big hit in 2020 when it slashed the dividend in the early weeks of the pandemic. The board subsequently raised the dividend back to the previous level, but the damage had been done. A new CEO took control about two years ago to get Suncor back on track. Since then, the company has trimmed staff and become more efficient. Safety records have also improved.
Suncor used to be a top energy pick due to its integrated business model that includes production assets, refineries, and retail operations. This model appears to be finding favour again among investors. Suncor trades near $48 at the time of writing compared to $58 in February. Investors who buy the dip can get a dividend yield of 4.7%.
Telus
Telus (TSX:T) trades near $20 per share right now. It was as high as $34 in 2022. Price wars, regulatory uncertainty, and soaring interest rates have all put pressure on Telus and its Canadian communications peers in the past three years. Headwinds will persist with lower immigration and ongoing competition, but Telus doesn’t have a struggling media business dragging it down.
Telus Health, along with the agriculture and consumer goods division, has the potential to become meaningful drivers of long-term growth. The dividend looks safe for the time being, but with a yield of 8% the market is either starting to bet on a cut, or has driven the stock down too far. Telus is a contrarian bet here, but there is decent upside potential if the market stabilizes.
TC Energy
TC Energy (TSX:TRP) spun off its oil pipelines business in 2024 to focus on natural gas and power generation. The company is putting two major natural gas pipeline projects into service in 2025 and has a solid capital program that will see TC Energy invest roughly $6 billion annually over the medium term to drive revenue growth to support higher dividends. Investors have received an annual dividend increase for more than 20 years. The stock is down to $65 from a recent high above $70. Investors can currently get a dividend yield of 5.2%.
The bottom line on passive income
Ongoing volatility is expected until the trade war fears are sorted out. Additional downside is possible, but these five stocks already look attractive at their current prices and pay good dividends while you wait for the recovery.
