The market rally over the past two years has wiped out many of the deals in the TSX, but investors can still find top Canadian dividend stocks trading at fair prices for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on dividend income and long-term total returns.
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Canadian Natural Resources
Canadian Natural Resources (TSX: CNQ) trades below $60 per share at the time of writing compared to $70 in March.
The pullback gives investors who missed the surge earlier this year a chance to buy CNQ on a meaningful dip and secure a solid 4.2% dividend yield.
Volatility in the price of oil is expected to continue over the near term as traders react to positive or negative news related to the war between the United States and Iran. At issue is the closing of the Strait of Hormuz, which is a narrow waterway between Iran and Oman through which roughly 20% of global oil supply has to pass to get to international buyers.
LNG demand surge
The U.S-Iran and Russia-Ukraine wars have forced countries around the globe to seek out reliable energy supplies from stable producers. This has led to a surge in demand for oil and liquified natural gas (LNG) from Canada and the United States.
New pipeline infrastructure in Canada came online in the past two years to enable domestic oil and natural gas producers to ship more product to international buyers. This is already benefiting CNRL. Looking ahead, in an effort to reduce reliance on sales to the United States and take advantage of rising international demand, Canada is planning to further expand its oil export capacity in the next few years through the expansion of existing pipelines, the building of new ones, and the construction of new LNG export facilities.
CNRL is a major producer of oil, natural gas, and natural gas liquids with a diversified oil portfolio that includes oil sands, conventional light and heavy oil, and offshore oil assets. The company has the financial clout and balance sheet strength to grow production through acquisitions and drilling programs as needed.
CNRL has increased the dividend for 26 consecutive years.
Enbridge
Enbridge (TSX: ENB) trades near $78 at the time of writing compared to the 12-month high around $80. The stock isn’t on sale, but investors who buy at the current level can get a solid 5% dividend yield and look to add to the position on any weakness.
Enbridge has a $40 billion secured capital program on the go that will help drive up revenue and distributable cash flow in the next few years. This should support steady dividend increases. ENB stock has raised its distribution in each of the past 31 years.
The surge in global demand for North American oil and natural gas bodes well for Enbridge, as well. The company owns a large oil export terminal in Texas and is a partner on the Woodfibre LNG export facility being built on the coast of British Columbia.
Enbridge’s expertise in building and operating energy infrastructure makes it a good candidate to participate in new oil and gas pipelines that could get approval as Canada moves towards its goal of becoming an energy superpower.
The bottom line
CNRL and Enbridge pay good dividends that should continue to grow. If you have some cash to put to work in a dividend portfolio, these stocks deserve to be on your radar.
