The market correction is driving yields on top TSX dividend stocks to levels not seen since the 2020 market crash. Contrarian investors with a buy-and-hold strategy are wondering which dividend-growth stocks might now be oversold and good to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio.
TC Energy
TC Energy (TSX:TRP) has increased its dividend annually for more than 20 years. The stock currently trades below $46 per share compared to $74 at the peak in 2022.
The decline is largely due to rising interest rates. Higher borrowing costs eat into profits and can make some capital projects no longer viable. TC Energy has a $34 billion capital program on the go that is expected to drive revenue and cash flow growth to support ongoing annual dividend increases of at least 3% over the medium term.
The company recently said its troubled Coastal GasLink pipeline project is now 98% complete. As soon as the pipeline goes into service, investors might start to warm up to the stock. In the meantime, investors who buy TRP at the current share price can get a dividend yield of 8.1%.
Enbridge
Enbridge (TSX:ENB) raised its dividend in each of the past 28 years. The oil pipeline giant continues to diversify its asset base away from oil transmission networks, including the recently announced deal to buy three American natural gas utilities for US$14 billion. The new assets will make Enbridge the largest natural gas utility in North America.
Enbridge purchased an oil export terminal in 2021 and secured a stake last year in a new liquified natural gas (LNG) export facility being built on the coast of British Columbia. Exports of oil and natural gas are expected to grow in the coming years.
In addition, Enbridge is positioned well to benefit from the construction of solar and wind facilities in the United States after its purchase in 2022 of the third-largest American wind and solar project developer.
Enbridge trades for close to $43.50 at the time of writing compared to more than $59 at the high point last year. The drop appears overdone, given the solid outlook for revenue growth coming from the new assets and the current $17 billion capital program.
Investors who buy ENB stock on the pullback can now get a dividend yield of 8.2%.
The bottom line on high-yield dividend stocks
TC Energy and Enbridge pay attractive dividends that should continue to grow. If you have some cash to put to work in a TFSA or RRSP focused on dividends, these stocks deserve to be on your radar.
