3 of the Best Dividend Stocks to Buy on Dips

Buying high-quality dividend stocks on dips can be a powerful long-term investing strategy. Not only do you get the opportunity to lock in shares at lower prices, but you also enjoy higher dividend yields, boosting your income – so long as those dividends are secure. Below are three strong dividend stocks that are temporarily out of favour and may be worth scooping up on weakness.

1. TD Bank: A blue-chip bargain

Toronto-Dominion Bank (TSX:TD) is one of Canada’s most reliable dividend stocks. Over the last decade, it has grown its dividend at a solid annual rate of 8.3%, a testament to its consistent earnings power. The bank offers a full suite of services, including personal and commercial banking, capital markets, wealth management, and insurance.

TD recently faced a significant regulatory setback, paying a US$3 billion fine in 2024 tied to anti-money laundering compliance issues in the U.S. While this hurt investor sentiment in the short term, it also created a buying opportunity.

At the current price of $86.68, TD offers a dividend yield of 4.8%, which is about 20% higher than its 10-year average yield of 4%. With an estimated payout ratio of 55%, the dividend remains well-covered and sustainable. The stock trades at roughly a 10% discount on a forward earnings basis, offering a compelling total return potential of around 10% per year when factoring in its dividend and growth outlook.

2. Exchange Income: Undervalued and underrated

Exchange Income (TSX:EIF) is a lesser-known name but a reliable monthly dividend payer that operates in two essential sectors: aerospace and aviation, and manufacturing. Its businesses are crucial to remote Canadian communities, providing medevac, charter, cargo, and passenger air services, alongside producing specialized manufacturing products.

Although the stock has pulled back 14% from its 52-week high, its fundamentals remain strong. At $50.74 per share, EIF pays a 5.2% yield – lower than its 10-year average of 6%, which reflects improved investor confidence. Still, analysts suggest it trades at a 27% discount, and the dividend is covered by both earnings and operating cash flow.

Its diversified operations and essential service nature provide resilience and steady income, making this a smart choice for dividend-focused investors looking to buy on weakness.

3. Brookfield Infrastructure Partners: Reliable income from global infrastructure

Brookfield Infrastructure Partners (TSX:BIP.UN) owns and operates critical infrastructure assets globally, spanning utilities, transportation, energy, and data infrastructure. These include everything from power lines and toll roads to data centres and telecom towers. Its business model is built on long-term contracts and inflation-linked revenues, making it a cash flow machine.

Due to its capital-intensive model, the stock is sensitive to interest rate changes. That pressure has helped push the stock down 20% from its 52-week high, now trading at $40.23 per unit and offering a generous 5.9% yield. Analysts believe it’s trading at a 20%-plus discount, presenting a strong value proposition.

Despite its debt load, BIP’s high-quality assets, global reach, and track record of consistent cash distribution growth make it a solid option for income-focused investors willing to ride out short-term volatility.

The Foolish investor takeaway

These three dividend stocks – TD Bank, Exchange Income, and Brookfield Infrastructure Partners – each offer a combination of income, value, and long-term growth potential. Buying them on dips not only increases your yield on cost but also sets the stage for attractive total returns over time.