RRSP Deals: 2 Dividend-Growth Stocks to Buy on the Dip and Own for Decades

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A number of top Canadian dividend-growth stocks are now trading at discounted prices after pulling back from the post-pandemic highs. Investors who missed the rally after the 2020 market crash are wondering which TSX dividend stocks might be undervalued right now and good to buy for a self-directed Registered Retirement Savings Plan (RRSP) portfolio.

Bank of Nova Scotia

Bank of Nova Scotia (TSX:BNS) is Canada’s fourth-largest bank, with a current market capitalization near $79 billion. The stock trades for close to $64 at the time of writing. It was as low as $55 in late October last year, but it is still way off the $93 it reached in early 2022.

Bank stocks came under pressure over the past two years as investors worried that soaring interest rates in Canada and the United States would trigger a recession and drive up loan losses. Bank of Nova Scotia and its peers have increased provisions for credit losses over the past few quarters to cover the increase in potential loan defaults, and more pain is expected this year, but the overall loan book remains in good shape, and Bank of Nova Scotia is still a very profitable business.

The new chief executive officer (CEO) who took the reins early last year is focused on getting better returns for shareholders. Bank of Nova Scotia cut about 3% of its staff over the past year to reduce expenses. In addition, the bank is shifting its growth investments to Canada, the United States, and Mexico. The South American operations in Chile, Colombia, and Peru will no longer be as strategically important, and it wouldn’t be a surprise to see these assets get monetized to free up capital for other initiatives.

Interest rates might stay elevated for longer than previously expected as the central banks continue their battle to get inflation down to the 2% target. However, the economy has absorbed the hikes that occurred in the past two years without a major downturn, and economists broadly expect the central banks will be able to navigate a soft landing. In that scenario, Bank of Nova Scotia is probably undervalued right now.

Investors who buy BNS stock at the current level can get a 6.6% dividend yield.

Enbridge

Enbridge (TSX:ENB) has increased its dividend for 29 consecutive years. The board raised the payout by 3.1% for 2024 and investors should see annual increases of 3% to 5% in line with anticipated growth in distributable cash flow (DCF).

Enbridge has shifted its growth focus from building large new oil pipelines to investing in export facilities, natural gas utilities, and renewable energy assets. The company is in the process of finalizing the US$14 billion acquisition of three natural gas utilities in the United States. These assets, combined with Enbridge’s extensive natural gas transmission network, put the company in a strategically competitive position. Analysts anticipate growth in natural gas demand to fuel power generation for data centres in the coming years. The pipelines and utilities will also be important for the transition to hydrogen.

Enbridge is working through a $25 billion capital program that will drive up revenue to go along with gains through acquisitions. ENB stock trades near $50 at the time of writing compared to $59 at the peak in 2022, so there is decent upside potential.

Investors who buy the stock at the current level can get a dividend yield of 7.3%.

The bottom line on top RRSP stocks

Bank of Nova Scotia and Enbridge pay attractive dividends that should continue to grow. If you have some cash to put to work, these stocks look cheap today and deserve to be on your radar for a buy-and-hold RRSP portfolio.

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The Motley Fool recommends Bank Of Nova Scotia and Enbridge. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker owns shares of Enbridge.