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3 Top TSX Dividend Stocks to Start a Self-Directed RRSP

Businessman looking at a red arrow crashing through the floor
Image source: Getty Images.

Written by Andrew Walker at The Motley Fool Canada

The market correction is providing Canadian investors with a chance to buy top TSX dividend stocks at discounted prices for a self-directed Registered Retirement Savings Plan (RRSP). Buying great dividend stocks during a pullback takes courage, but it can also make a huge difference on long-term returns inside the retirement fund.

Enbridge

Enbridge (TSX:ENB) operates a massive network of oil and natural gas pipelines in Canada and the United States. The company moves nearly a third of the oil produced in the two countries. This makes Enbridge strategically important for the smooth operation of the Canadian and U.S. economies.

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Big pipelines are not popular these days and Enbridge is battling efforts to get its Line 5 pipeline shut down in both Wisconsin and Michigan. The recent pressure in Wisconsin is probably the main reason the stock is off so much in the past two weeks.

A temporary shut-down could be possible due to potential erosion risks, but it is unlikely the entire pipeline would be closed for any material amount of time given the economic importance of the asset for both countries.

Investors can take advantage of the dip to buy Enbridge for close to $49.50 per share at the time of writing compared to $59.50 in June last year. At the current price, the dividend provides a 7.2% dividend yield.

Enbridge raised the dividend in each of the past 28 years. Earnings are expected to increase at a modest pace to support ongoing dividend growth.

Bank of Montreal

Bank of Montreal (TSX:BMO) paid its first dividend in 1829 and has given shareholders a piece of the profits ever since. Investors just received another raise, even as the bank reported a drop in year-over-year fiscal Q2 earnings.

The stock trades for close to a 12-month low near $113 per share at the time of writing compared to $136 in February.

Recent troubles in the U.S. banking sector following a few high-profile bank failures in the past few months have investors worried that the broader financial market could be headed for big trouble later this year.

Bank of Montreal closed a US$16.3 billion acquisition in the United States in February right before the first U.S. banks failed. Investors might be concerned that BMO paid too much for Bank of the West, which added more that 500 branches with a heavy presence in California.

Near-term volatility should be expected, but BMO shareholders should see long-term benefits from the deal.

At the time of writing BMO stock provides a dividend yield of more than 5%.

Canadian Natural Resources

CNRL (TSX:CNQ) is Canada’s largest energy producer with a current market capitalization near $86 billion.

The stock trades for close to $78 per share at the time of writing compared to $88 in June last year. Oil bulls are of the opinion that WTI oil is headed back to US$100 per barrel by the end of the year or in 2024. If that proves to be the case, CNQ stock looks cheap today.

CNRL raised the dividend in each of the past 23 years with a compound annual dividend growth rate of better than 20% over that timeframe. Investors who buy the stock at the current price can get a 4.6% dividend yield.

The bottom line on top TSX dividend stocks for RRSP investors

Enbridge, Bank of Montreal, and CNRL pay attractive dividends that should continue to grow. If you have some cash to put to work in a self-directed RRSP, these stocks deserve to be on your radar.

The post 3 Top TSX Dividend Stocks to Start a Self-Directed RRSP appeared first on The Motley Fool Canada.

Should You Invest $1,000 In Bank of Montreal?

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The Motley Fool recommends Canadian Natural Resources and Enbridge. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker owns shares of Enbridge.

2023