Stock markets are at record highs, but self-directed Registered Retirement Savings Plan (RRSP) investors can still find deals among TSX dividend stocks that sold off due to soaring interest rates in Canada and the United States. Interest rates are expected to decline in both countries in the coming months and through 2025. This should attract money back into undervalued dividend payers.
TC Energy
TC Energy (TSX:TRP) raised its dividend in each of the past 24 years, and more gains should be on the way. The company's Coastal GasLink pipeline reached mechanical completion in late 2023 and will start to deliver natural gas to a new liquified natural gas (LNG) export facility in 2025. The new revenue stream, in addition to cash flow expansion from other capital projects, should support ongoing dividend growth. TC Energy intends to invest $6 billion to $7 billion annually on new assets over the medium term.
The stock started its rebound from the rate-hike pullback near the end of last year and picked up momentum over the past two months on the back of consecutive rate cuts by the Bank of Canada. Economists expect the U.S. to begin cutting interest rates as soon as next month, so more upside should be on the way.
TC Energy has 93,000 km of natural gas pipelines and 650 billion cubic feet of natural gas storage capacity in Canada, the United States, and Mexico. Natural gas demand is expected to surge in the coming years as countries and businesses build gas-fired power-generation facilities to meet electricity demand from electric vehicles and AI data centres.
Investors who buy TRP stock at the current level near $61 can get a dividend yield of 6.3%. The stock was as high as $74 in 2022, so there is decent upside potential.
Fortis
Fortis (TSX:FTS) is a Canadian utility operator with $69 billion in assets spread out across Canada, the United States, and the Caribbean. The company grows through a combination of strategic acquisitions and development projects.
Fortis is working on a $25 billion capital program that is expected to increase the rate base from $37 billion in 2023 to $49.4 billion in 2028. The resulting boost to revenue and cash flow should support planned annual dividend increases of 4-6%. Fortis increased the dividend in each of the past 50 years, so investors should feel comfortable with the guidance.
Fortis has other projects under consideration that could be added to the development pipeline to push cash flow growth higher. As interest rates decline, the drop in borrowing costs will free up more cash and could lead to more consolidation in the utility sector. Fortis hasn't done a large deal for several years. It wouldn't be a surprise to see the company make a move as funding costs drop.
Fortis trades near $59 at the time of writing. That's off the 12-month low of around $50 but is still well shy of the $65 the stock fetched at one point in 2022. Investors who buy Fortis at the current level can get a dividend yield of 4%.
The bottom line on top RRSP stocks for 2025
TC Energy and Fortis 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. As interest rates decline in Canada and the United States, TC Energy and Fortis could catch a nice tailwind through next year.