RRSP Wealth Fund: 2 Cheap TSX Dividend Stocks to Buy Now for Total Returns

These top TSX dividend-growth stocks look attractive to buy today for RRSP investors seeking attractive total returns.

| More on:

Canadian investors can take advantage of the market correction to buy top TSX dividend stocks at undervalued prices to boost yields while setting the portfolio up for attractive long-term total returns.

TD Bank

TD (TSX:TD)(NYSE:TD) trades near $78 per share at the time of writing compared to $109 earlier this year. The steep decline in the share price is part of a broad selloff in bank stocks over the past few months that materialized, as investors started to worry about a possible recession.

Canadian banks are under added pressure due to concerns that sharp increases in interest rates announced by the Bank of Canada to fight inflation will trigger a crash in the residential housing market. A slowdown in home sales and a decrease in prices has already begun. One bank report anticipates a peak-to-trough price decline of 19%.

Despite the economic headwinds, TD should generate solid revenue and profits this year. Fiscal Q1 and Q2 2022 results already came in better than the first half of 2021.

Looking ahead, TD is working through a US$13.4 billion acquisition to drive future growth. The purchase of First Horizon will add more than 400 branches to the American operations and make TD a top-six bank in the United States.

The board raised the dividend by 13% late last year. Another generous increase should be on the way for fiscal 2023.

The stock looks oversold at the current price and offers investors a 4.5% dividend yield. Buying TD shares on big dips has historically proven to be a savvy move for investors. A $10,000 investment in TD stock 25 years ago would be worth about $175,000 today with the dividends reinvested.

Canadian National Railway

CN (TSX:CNR)(NYSE:CNI) trades near $145 per share at the time of writing compared to the 2022 high around $170. Investors might be tempted to skip CN due to its 2% dividend yield, but that would be a mistake when choosing stocks for a portfolio focused on total returns. CN has one of the best dividend-growth rates on the TSX since it went public in the mid-1990s and has delivered great capital gains.

CN raised the payout by 19% for 2022. The company is also buying back up to 6.8% of the outstanding stock under the current repurchase plan. CN generates significant free cash flow and has the funds to make the required capital investments while returning ample cash to shareholders.

CN operates a unique rail network that connects ports on three coasts. This gives it a wide competitive moat and makes CN attractive for domestic and international clients that need to move commodities or finished goods across Canada and through the United States.

Long-term RRSP investors have done well with CN stock. A $10,000 investment in CN shares 25 years ago would be worth about $390,000 today with the dividends reinvested.

The bottom line on top stocks to buy for total returns

TD and CN look undervalued right now and should continue to deliver solid dividend growth and long-term capital gains. If you have some cash to put to work in a self-directed RRSP, these stocks deserve to be on your radar.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool recommends Canadian National Railway. Fool contributor Andrew Walker owns shares of Canadian National Railway.  

More on Dividend Stocks

Dividend Stocks

Top Canadian Stocks to Buy Right Now With $1,000

Investing in stocks is not about timing but consistency. If you have $1,000 to invest, these stocks offer an attractive…

Read more »

cloud computing
Dividend Stocks

Is Manulife Stock a Buy for its 3.5% Dividend Yield?

Manulife stock has been a long-time dividend winner, but the average has come down over the last few years. So…

Read more »

Person holds banknotes of Canadian dollars
Dividend Stocks

This 7.5% Dividend Stock Pays Cash Every Single Month

Monthly dividend income can be a saviour, but especially when it provides passive income like this!

Read more »

jar with coins and plant
Dividend Stocks

2 High-Yield Dividend Stocks You Can Buy and Hold for a Decade

These TSX stocks still offer attractive dividend yields.

Read more »

concept of real estate evaluation
Dividend Stocks

Invest $23,253 in This Stock for $110 in Monthly Passive Income

Dividend investors don’t need substantial capital to earn monthly passive income streams from an established dividend grower.

Read more »

Dividend Stocks

3 Mid-Cap Canadian Stocks That Offer Reliable Dividends

While blue-chip, large-cap stocks are the preferred choice for most conservative dividend investors, there are some solid picks in the…

Read more »

The letters AI glowing on a circuit board processor.
Dividend Stocks

Is OpenText Stock a Buy for Its 3.6% Dividend Yield?

OpenText stock has dropped 20% in the last year, yet now the company looks incredibly valuable, especially with a 3.6%…

Read more »

calculate and analyze stock
Dividend Stocks

How to Use Your TFSA to Earn $6,905.79 Per Year in Tax-Free Income

Put together a TFSA and this TSX stock, and you could create massive passive income from returns and dividends.

Read more »