The market correction is driving down the share prices of top TSX dividend stocks. Investors who stayed on the sidelines this year are wondering which stocks are now good to buy for a self-directed Registered Retirement Savings Plan (RRSP). Let’s take a look at Royal Bank (TSX:RY)(NYSE:RY) and Enbridge (TSX:ENB)(NYSE:ENB) to see if one deserves to be on your buy list.
Royal Bank
Royal Bank is Canada’s largest financial institution with a current market capitalization of $176 billion. The bank also ranks among the top 10 in the world based on this metric.
ADVERTIsem*nT
Royal Bank is a profit machine, even in challenging times. The bank generated $16.1 billion in earnings in fiscal 2021 and through the first nine month of fiscal 2022 the bank is on track to top the 2021 results. The bank finished the fiscal third quarter (Q3) 2022 with a common equity tier-one (CET1) ratio of 13.1%. The banks are required to have a CET1 ratio of 10.5%, so Royal Bank is sitting on significant excess cash. This provides a buffer to ride out an economic downturn and gives Royal Bank flexibility to make strategic acquisitions or return more cash to shareholders.
The board raised the dividend by 11% late last year and gave investors another 7% increase when the bank reported fiscal Q2 2022 earnings. Even if the economy goes through a recession next year, investors should see the dividend continue to grow at a steady pace.
Royal Bank will likely see revenue growth slow down and loan losses increase, as soaring interest rates impact businesses and households. That being said, the pullback in the share price from $149 earlier this year to the current price of $123 looks overdone.
Investors who buy Royal Bank stock at the current level can get a 4.1% yield and simply wait for the bank sector to recover.
Enbridge
Enbridge (TSX:ENB)(NYSE:ENB) trades for $52.50 per share at the time of writing compared to more than $59 in June. Investors can take advantage of the pullback to secure a 6.5% dividend yield at this level.
Enbridge isn’t an energy producer. The company simply moves oil and natural gas from the production sites to refineries, utilities, or storage locations and charges a fee for providing the services. Volatility in commodity demand can impact throughput along the pipeline networks, but the changing oil and natural gas prices have limited direct impact on Enbridge’s revenue stream. Demand for Canadian and U.S. energy remains robust in both the domestic and international markets, and Enbridge is in a good position to benefit.
The company moves 30% of the oil produced in Canada and the United States and 20% of the natural gas used by American homes and businesses. Enbridge also owns an oil export facility in Texas and is investing in the new Woodfibre liquified natural gas project in British Columbia.
Enbridge has raised the dividend in each of the past 27 years. The current $13 billion capital program should support continued dividend increases.
Is one a better buy?
Royal Bank and Enbridge are leaders in their industries and pay attractive dividends that should continue to grow. At this point, both stocks appear oversold, so I would probably split a new RRSP investment between the two companies to get an average dividend yield of 5.3% and a shot at some nice upside when the market recovers.
Before you consider Enbridge, you'll want to hear this.
Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in September 2022 ... and Enbridge wasn't on the list.
The online investing service they've run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 21 percentage points. And right now, they think there are 5 stocks that are better buys.
Overall, RBC stock has had a strong start to the year. And as interest rates come down, it looks well positioned to end 2024 even stronger, especially when there is a dividend yield of 3.86% to consider.
Fortis and TD have great track records of delivering steady dividend growth and attractive long-term total returns. If you have some cash to put to work in a self-directed RRSP, these stocks still look cheap today and deserve to be on your radar.
Enbridge Inc has 0.26% upside potential, based on the analysts' average price target. Is TSE:ENB a Buy, Sell or Hold? Enbridge Inc has a consensus rating of Moderate Buy which is based on 5 buy ratings, 3 hold ratings and 1 sell ratings.
Royal Bank of Canada (TSX:RY) is a solid long-term investment. In the last five, 10, and 20 years, it delivered annualized total returns of approximately 10.3%, 11.1%, and 12.3%, respectively.
Recent earnings reports, analyst recommendations, and market trends indicate that Canadian bank stocks remain a solid choice for both income and growth investors. Canadian banks have shown resilience in navigating economic uncertainties.
Ms. Hasan says anyone making under $50,000 should focus on their TFSA or FHSA, since the tax deferral benefits for the RRSP are quite small if you're in a lower income tax bracket.
Enbridge offers a unique value proposition that brings together a combination of transparent growth, a reliable, low-risk business model and significant dividend income.
Enbridge's earnings in 2024 is $3,974,820,143. On average, 3 Wall Street analysts forecast ENB's earnings for 2024 to be $4,485,481,031, with the lowest ENB earnings forecast at $4,420,158,491, and the highest ENB earnings forecast at $4,572,577,750.
The reason has to do with how pipelines operate. Pipelines are much like real estate investment trusts: they lease out infrastructure. This is not an industry with huge amounts of innovation occurring, so it makes sense to simply pay out most of the profit.
The average price target represents 5.55% Increase from the current price of C$156.57. What do analysts say about Royal Bank Of Canada? Royal Bank Of Canada's analyst rating consensus is a Strong Buy. This is based on the ratings of 13 Wall Streets Analysts.
As inflationary pressures and high interest rates created a tough borrowing environment for consumers and businesses, the bank's lending activities suffered. As a result, Royal Bank's stock price declined by about 27% from its peak in January 2022 to its lows in October 2023.
So if your financial institution closes, your money is protected. How it works: Eligible deposits — including money in your savings and chequing accounts, GICs, and foreign currency — are automatically covered to a limit of $100,000 per separately insured category.
TD Bank also has a much higher dividend yield than Royal Bank. The stock pays $1.02 in dividends per quarter, which works out to $4.08 per year. At today's stock price of $79.40, that works out to a 5.13% dividend yield. By contrast, RY stock only yields 3.8%.
On an adjusted basis, RBC says it earned $3.26 per diluted share, up from an adjusted profit of $2.83 per diluted share a year ago. Earnings were well above the average of $2.97 per share that analysts had expected, according to LSEG Data & Analytics.
Based on the reviews above, the consensus seems to be that Royal Bank (RY-T) is a stable and sound long-term investment in the Canadian banking sector.
Hobby: Web surfing, Skiing, role-playing games, Sketching, Polo, Sewing, Genealogy
Introduction: My name is Maia Crooks Jr, I am a homely, joyous, shiny, successful, hilarious, thoughtful, joyous person who loves writing and wants to share my knowledge and understanding with you.
We notice you're using an ad blocker
Without advertising income, we can't keep making this site awesome for you.
