The Canadian stock market has had a remarkable rally over the past year, with the TSX surging nearly 30%. Yet, seasoned investors know that markets move in cycles, and a pullback can be the ideal moment to capture high-quality dividend stocks at a more attractive price. For those focused on building wealth through a self-directed TFSA or RRSP, dividend growth stocks are particularly appealing. These investments not only offer the potential for steady income but also provide the benefit of compounded growth over time.

In times of volatility, strong dividend stocks can anchor your portfolio, helping to generate passive income while keeping you positioned for long-term appreciation. By strategically adding high-potential Canadian growth stocks to your portfolio during a pullback, you stand to benefit from both yield and value—a winning combination for any investor aiming to secure financial independence. Below, we spotlight two powerhouse Canadian stocks that are especially promising in the dividend growth space and should be on your radar when the market corrects. Whether you’re a seasoned investor or just starting to build a solid portfolio, these dividend-paying giants could be your next best move.

1. Royal Bank of Canada (RY): A Resilient Banking Giant with Strong Dividend Potential

Canada’s banking sector has a reputation for resilience, and the Royal Bank of Canada (TSX:RY) is a standout. This banking powerhouse saw a strong rally over the past year, driven by improving investor sentiment as interest rate concerns shifted towards expectations of eventual cuts. Typically, higher interest rates can widen net interest margins for banks, but rapid rate hikes can strain borrowers. Royal Bank has prepared for these pressures by setting aside provisions for credit losses (PCL), a conservative move that has already proven effective, with PCL beginning to decline in Q3 of fiscal 2024.

In addition to managing risk, Royal Bank has strengthened its position through its acquisition of HSBC Canada, boosting its earnings and expanding its reach in the Canadian market. With a robust Common Equity Tier 1 (CET1) ratio of 13%, the bank is well-prepared to continue rewarding shareholders through stock buybacks and dividend growth. During the next market pullback, Royal Bank could present an ideal buying opportunity for investors seeking a dividend stock that combines income potential with stability and growth.

2. TC Energy (TRP): A High-Yield Energy Stock with Growth Opportunities

The Canadian energy sector offers a powerful blend of income and growth potential, and TC Energy (TSX: TRP) is a prime example. The stock has rebounded significantly in the last year after a challenging 2023, when soaring borrowing costs dampened investor enthusiasm. Now, with interest rates easing, TC Energy’s outlook has improved, making it an attractive pick for dividend-seeking investors.

Recently, TC Energy completed its $14.5 billion Coastal GasLink pipeline, a major project that positions the company to benefit from strong demand in energy infrastructure. Moreover, a strategic divestment of its oil pipelines division has enabled TC Energy to focus on its core assets, reducing debt and freeing up cash for growth and dividends. With a dividend growth record spanning over 24 years and a yield of 6%, TC Energy offers an appealing income stream. A market dip could present an opportune moment to add this high-yielding, dividend-growing stock to your portfolio.

Would You Invest $1,000 in the Next Dip?

A market pullback can be the perfect time to consider high-quality dividend stocks like Royal Bank of Canada and TC Energy. With their solid fundamentals and dedication to growing dividends, these two stocks offer both income and growth potential for long-term investors. Investing $1,000 during the next dip could allow you to lock in a solid dividend yield and potential capital gains as the stocks recover. However, remember that all investments carry risks, and past performance is no guarantee of future results.

Disclaimer: Before making any investment, it’s important to conduct thorough research or consult with a financial advisor to ensure these stocks align with your financial goals and risk tolerance.