RRSP Deals: 2 Top Dividend Stocks to Buy on a Dip

Canadian investors can take advantage of the market correction to buy large TSX dividend stocks at discounted prices for a self-directed Registered Retirement Savings Plan (RRSP).

Buying stocks during a pullback is a contrarian move, and share prices may be lower than expected in the near term. However, good stocks with strong track records of dividend growth tend to bounce back in a market recovery and buying the dips can boost long-term total returns.

TC Energy

TC Energy (TSX:TRP) has raised its dividend for 23 consecutive years. Management expects the $34 billion capital program to deliver sufficient earnings and cash flow growth to support an annual dividend increase of at least 3% over the medium term.

Despite the positive guidance, TRP stock has declined significantly over the past year. At the time of writing, TC Energy is trading below $52 per share compared to above $73 at the high point of 2022.

The pullback came amid a broader correction in the energy infrastructure sector. Pipeline companies use debt to finance part of their capital programs, and a sharp rise in interest rates over the past year has made borrowing more expensive.

TC Energy is also struggling with delays and cost overruns on a major project. The Coastal GasLink pipeline will bring natural gas from producers in northeastern British Columbia to a new liquefied natural gas (LNG) facility being built on BC’s coast. TC Energy now expects the final cost of the project to be at least $14.5 billion, which is more than double the initial budget.

At the time of the first quarter (Q1) 2023 earnings release, TC Energy said the Coastal GasLink development was 87% complete, so most surprises should be in the rearview mirror, and shareholders may focus on other growth initiatives.

Investors who buy TRP stock at current levels can earn a 7.2% dividend yield.

Fortis

Fortis (TSX:FTS) isn’t as cheap as it is under the 2022 correction, but the stock is still trading below last year’s highs and looks undervalued. At the time of writing, Fortis is trading near $56 per share. It peaked at $65 in the spring of 2022 before the utility sector sold off as the Bank of Canada and the US Federal Reserve began raising interest rates.

Fortis operates $65 billion in utility assets located in Canada, the United States, and the Caribbean. Businesses include power-generation plants, electric transmission networks, and natural gas distribution utilities. These are rate-regulated revenue streams that should be predictable and reliable in most economic conditions.

Fortis is working on a $22.3 billion capital program that is expected to increase the base rate by an average of 6% annually over five years. The resulting increase in earnings and cash flow should support a planned dividend increase of at least 4% annually through 2027.

Fortis has raised its dividend in each of the last 49 years. Investors who buy FTS stock at current levels will earn a 4% dividend yield.

The bottom line is the top RRSP stocks

TC Energy and Fortis pay attractive dividends that should continue to grow. If you have money to put to work in a self-directed RRSP, these stocks are cheap right now and deserve to be on your radar.