With the TSX back at a new record high investors who missed the rebound are wondering which top Canadian stocks might still be undervalued for a self-directed Registered Retirement Savings Plan (RRSP) or Tax-Free Savings Account (TFSA) focused on dividends and total returns.
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TD Bank
TD Bank (TSX: TD) trades near $90 per share at the time of writing. The stock is up about 17% in 2025 but remains way below the $108 it reached in early 2022 before rate hikes sent bank stocks into a pullback.
Soaring inflation after the pandemic forced the Bank of Canada and the U.S. Federal Reserve to aggressively raise interest rates. This put a lot of businesses and households with variable-rate debt in a bad position, leading TD and its peers to steadily increase provisions for credit losses (PCL).
Rate cuts arrived in the second half of 2024, triggering a rally in bank stocks, but TD didn’t participate in the big move due to some issues in the U.S. operations. The bank ran into trouble with U.S. regulators last year for not having adequate systems in place to prevent money laundering at some of the American branches. TD received fines of more than US$3 billion, and regulators placed an asset cap on TD’s American business. This means TD has to find other growth opportunities, and the cap has forced the bank to adjust its near-term earnings growth guidance while it sorts out a new strategy.
The rally in 2025 is likely due to bargain hunters sensing the worst is over for the bank, along with expectations for additional cuts to interest rates later this year. TD has a large capital position to fund organic growth initiatives in Canada. The bank is also buying back $8 billion in stock. At some point, the asset cap in the U.S. should be lifted to enable growth in the American business. Investors who buy TD stock at the current level can get a dividend yield of 4.7%, so you get paid well to wait for the turnaround to materialize.
Suncor Energy
Suncor (TSX: SU) trades near $50 per share at the time of writing compared to $58 earlier this year. The dip gives energy bulls a chance to buy SU stock on a decent pullback and pick up a solid 4.6% dividend yield.
Suncor is known for its large oil sands production operations, but the company also has four large refineries that turn crude oil into fuels and other products. Gasoline and diesel fuel are then sold through Suncor’s network of Petro-Canada retail locations.
The drop in the price of oil over the past year has put pressure on margins for the upstream business, but the refineries benefit from the lower input costs. Cheaper gasoline could entice more people to take road trips this summer, especially with Canadians deciding to stay at home rather than travel south of the border.
Suncor’s management team has done a good job in the past two years of reducing expenses and driving higher production, along with record refining throughput and record refined product sales.
Any news of a confirmed trade deal between the United States and China in the next few months could give oil prices a boost. If that happens, SU stock should move higher.
The bottom line on top TSX stocks
TD Bank and Suncor are good examples of TSX stocks that still look attractive. If you have some cash to put to work, these stocks deserve to be on your radar.
