Dividend investors are wondering which top TSX stocks might be attractive right now to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on income and long-term total returns.
The rally in the TSX over the past two years has pushed down yields on leading dividend payers, but investors can still find some names trading at reasonable prices and offering yields that sit comfortably above the rate of inflation.
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Canadian Natural Resources
Canadian Natural Resources (TSX: CNQ) is moving higher again on a rebound in oil prices caused by the latest flare-up in the war between the United States and Iran. The stock trades near $63 per share at the time of writing compared to $56 in early July.
At issue is the ongoing closure of the Strait of Hormuz, where nearly 20% of global oil supply typically passes en route to international buyers. Oil prices will likely remain volatile in the coming weeks and months as the U.S. and Iran try to iron out a deal that will hold up and allow oil shipments to resume at previous levels. Investors in CNRL, however, should look beyond the war in Iran and focus more on the long-term demand and export potential for Canadian energy producers.
Canada wants to expand its energy export capabilities to reduce reliance on the United States for oil and natural gas sales. The new goal of becoming an energy superpower is ambitious and will require significant investments, as well as buy-in from a swath of stakeholders. It is unlikely that all of the proposed major projects to move oil and natural gas to the coast for export will get approved or completed, but significant new capacity is probably on the way.
Canadian Natural Resources has extensive energy reserves. It is best known for its oil sands assets, but also operates conventional light and heavy oil, offshore oil, and natural gas production. The company’s $130 billion market capitalization and its solid balance sheet provide CNRL with the financial clout to make strategic acquisitions while also boosting production through investments in existing assets.
CNRL raised the dividend in each of the past 26 years. Investors who buy CNQ stock at the current level can get a dividend yield of 4%.
Enbridge
Enbridge (TSX: ENB) is a Canadian energy sector giant with extensive assets in the United States. In fact, most of Enbridge’s growth in recent years has been south of the border as the company focused on expanding its asset portfolio to include an oil export terminal, natural gas utilities, and renewable energy development projects.
These purchases added important diversification to the revenue stream that historically came from oil and natural gas pipelines. These legacy assets remain very important as demand for oil and natural gas continues to rise. The new businesses provide growth opportunities, while complementing the valuable oil and natural gas transmission infrastructure that is already in place.
Enbridge is currently working on a $40 billion capital program that will drive revenue and adjusted earnings higher in the next few years. This should enable the board to continue delivering steady dividend increases. Enbridge raised the distribution in each of the past 31 years. Investors who buy ENB stock at the current level can get a dividend yield of 5%.
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.
