The market pullback is giving income investors who missed the 2024 rally a chance to buy some top Canadian dividend stocks at discounted prices. Buying dips takes courage and the patience to ride out potential additional downside, but the strategy enables investors to get higher dividend yields while offering a shot at decent capital gains on a rebound.
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Enbridge
Enbridge (TSX: ENB) raised its dividend in each of the past 30 years. The stock currently trades near $60 per share compared to more than $64 earlier this month. At the current share price investors can get a dividend yield of 6.3%.
Enbridge completed its US$14 billion acquisition of three American natural gas utilities in 2024. Revenue from these businesses, along with contributions from the ongoing $26 billion capital program, should support ongoing dividend growth.
Enbridge diversified its assets in recent years, adding export facilities to take advantage of the growing international demand for North American oil and natural gas. In the domestic market, the company’s natural gas transmission network and the natural gas utilities position Enbridge to benefit from the expected growth in natural gas used to produce power for AI data centres.
TD Bank
TD Bank (TSX: TD) trades near $81 per share at the time of writing. The stock is above the 12-month low around $73, but is still way off the $108 it reached in early 2022 before going into an extended slide.
Initial weakness occurred as investors dumped bank stocks during 2022 and 2023 when the Bank of Canada and the U.S. Federal Reserve aggressively raised interest rates to get inflation under control. The steep rise in borrowing costs over such a short period of time put pressure on businesses and households with too much debt. This forced TD and its peers to set aside more cash to cover potential loan losses.
As soon as the central banks began cutting interest rates last year, the broader bank sector picked up a new tailwind. TD’s stock, however, didn’t join the party due to its troubles with U.S. regulators who fined TD more than US$3 billion and put a cap on the U.S. assets as penalties for not having adequate systems in place to identify and prevent money laundering in some U.S. branches.
TD put a new CEO in place earlier this year. As part of a strategy shift, the bank recently sold its remaining position in Charles Schwab for about US$14.6 billion and will use CAD$8 billion to buy back stock. The remaining proceeds will be used to accelerate organic growth, along with other initiatives.
TD’s Canadian operations remain very profitable and the U.S. business should eventually see the asset cap get removed. In the meantime, TD has a strong capital position to fund acquisitions in other markets that might become part of the revised growth strategy.
Investors will need to be patient, but you get paid a solid 5.2% dividend yield at the current price to wait for the recovery.
The bottom line on income stocks
Enbridge and TD are TSX giants that pay good dividends with high yields. If you have some cash to put to work, these stocks deserve to be on your radar.
