A shift of investor interest from tech stocks to oversold dividend stocks appears to be starting and could take off in the coming months if central banks act as expected. Contrarian investors are wondering which TSX dividend stocks remain undervalued today and might be good to buy for a self-directed Registered Retirement Savings Plan (RRSP).

Fortis

Fortis (TSX:FTS) trades near $55 per share at the time of writing. That's up from a 12-month low of around $50 but is still way off the $65 the stock reached in 2022 before interest rates soared in the last half of that year and through much of 2023.

Fortis uses debt to fund part of its growth program. Higher interest rates cut into earnings and reduce the cash that is available for distributions. The anticipated reduction in rates in Canada and the U.S. through next year, however, should give the stock a new tailwind.

Fortis is working on a $25 billion capital program that will boost the rate base from $37 billion to nearly $50 billion in 2028. As new assets go into service, there should be a jump in cash flow to support steady dividend increases. Fortis raised the dividend in each of the past 50 years and is targeting dividend growth of 4-6% per year over the medium term.

Investors can currently get a 4.3% dividend yield from the stock. It wouldn't be a surprise to see the share price drift back to the $65 mark over the next couple of years.

TD Bank

TD (TSX:TD) is certainly a contrarian pick right now in the Canadian banking sector. The stock recently traded as low as $74 compared to $108 in early 2022. Bargain hunters started moving into TD stock in the past few weeks, pushing the shares up to the current price near $80.

TD is under investigation by regulators in the United States for not having adequate systems in place to identify and prevent money laundering. The bank recently set aside US$450 million to cover potential fines. Analysts speculate the total penalty amount could run as high as US$4 billion by the time the whole mess is put to bed. Markets don't like uncertainty, and the stock could certainly retest the $74 mark on more negative news.

That being said, TD will eventually get through this challenge and remains a very profitable bank. Buying TD stock on large pullbacks has historically proven to be a profitable move. Investors who buy at the current price get paid a decent 5.1% dividend yield to ride out the turbulence.

The bottom line on top RRSP stocks

Fortis and TD have great track records of delivering steady dividend growth and attractive long-term total returns. If you have some cash to put to work in a self-directed RRSP, these stocks still look cheap today and deserve to be on your radar.

The post RRSP Investors: Buy These Top Dividend Stocks for Total Returns appeared first on The Motley Fool Canada.