RRSP pension plan: 2 TSX dividend stocks to create wealth

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Canadian savers use their RRSP contributions to build self-directed retirement portfolios. The market pullback in 2022 finally gives investors a chance to buy some great TSX dividend stocks at undervalued prices.

Manulife Financial

Manulife (TSX:MFC)(NYSE:MFC) has made great strides in de-risking since the Great Recession, when the stock market crash forced the company to drastically cut the dividend.

Despite the company’s turnaround over the past decade, many investors still shy away from stocks. Manulife underperformed its peers during the recovery from the pandemic rout and looks undervalued today while paying a very attractive dividend.

The council started increasing the payment again a few years ago. Management increased the payout by 12% just before the pandemic hit, and the board gave investors another 18% increase late last year.

Results for the first quarter of 2022 were somewhat weaker than the same period in 2021 due to the impacts of the Omicron surge earlier this year. Rising COVID-19 mortality and morbidity claims in the United States, as well as lower product sales caused by lockdowns in Asia, drove up expenses and reduced revenues.

These should be temporary issues. Investors can take advantage of the recent share price decline to buy Manulife at a discount and lock in a dividend yield of 5.65%. Manulife is trading near $23.25 per share at the time of writing, down from $28 in February.

Management continues to position the company for future growth. Manulife recently entered into an agreement that reinsures 75% of its former variable annuity business in the United States. The move unlocked $2.4 billion in capital and removes risk from the US business.

Manulife is investing heavily in digitizing its services, making it easier for customers to file claims and purchase products. The Canadian and US operations remain strong, and Manulife has significant growth potential in Asia, where the company is present in many growth markets.

Insurance companies should benefit as interest rates will rise over the next two years. Higher rates allow Manulife to earn better returns on the cash it needs to set aside to cover potential claims. The impact of a 2% rate hike is significant when looking at the return generated on billions of dollars.

The stock looks undervalued today and offers an excellent dividend with an above average yield.

Enbridge

Enbridge (TSX:ENB)(NYSE:ENB) is a major player in the North American energy infrastructure sector with oil and gas pipelines, natural gas storage, natural gas distribution utilities and renewable energy assets .

The revival of the oil and gas sector should benefit Enbridge as the world scrambles to obtain reliable Canadian and U.S. oil and liquefied natural gas (LNG). Enbridge purchased an oil export facility and related assets for US$3 billion late last year. It recently announced plans to build new pipelines to connect natural gas supplies to US LNG facilities for export.

Getting major new oil and gas pipelines approved and built is next to impossible these days, so the existing infrastructure that is in place is expected to become more valuable. Enbridge transports 30% of the oil produced in Canada and the United States and 20% of the natural gas used by the Americans.

The stock is up nearly 20% this year and trading near its 12-month high, but more upside should be on the way. Investors can still earn a dividend yield of 5.8% and annual distribution increases of 3-5% are reasonable to expect in the medium term.

The Bottom Line on Top RRSP Stocks to Buy Now

Manulife and Enbridge are leaders in their respective industries. Stocks pay big dividends that should continue to grow in the years to come. If you have the money to invest in a self-directed RRSP, these companies deserve to be on your radar.

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