Canadian retirees and other dividend investors are searching for undervalued top TSX dividend stocks to add to their self-directed Tax-Free Savings Account (TFSA) focused on generating high-yield passive income.
The pullback in the share prices of some great Canadian dividend-growth companies is giving investors a chance to get great deals and boost yields on their savings.
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Enbridge
Enbridge (TSX:ENB) trades near $47 per share at the time of writing compared to $59 at the high point in 2022.
The slide from June 2022 to the end of October last year was largely driven by the surge in interest rates in Canada and the United States. High inflation forced the Bank of Canada and the U.S. Federal Reserve to boost rates to cool off a hot economy and bring the jobs market back into balance. As soon as the market sensed rate hikes were done and cuts might be on the way in 2024, the share price of Enbridge began to pick up a tailwind, but it still looks oversold.
Management expects distributable cash flow to grow by 3% per year over the medium term, supported by the capital program and contributions from acquisitions. This should drive ongoing dividend increases. The board hiked the payout by 3.1% for 2024. This is the 29th consecutive annual dividend increase from Enbridge.
Investors who buy ENB stock at the current level can get a 7.7% dividend yield.
TC Energy
TC Energy (TSX:TRP) is another leading Canadian energy infrastructure stock that trades way below its all-time high even though the business continues to perform well. The stock price is near $50 right now compared to $74 at the peak in 2022.
TC Energy, like Enbridge, has a large capital program in place to drive revenue and cash flow expansion in the coming years. High interest rates make borrowing more expensive, and these companies use debt to fund part of their capital programs. That’s largely why the market soured on the pipeline stocks in the past two years.
It is very difficult to get major new pipeline projects approved and built, so the infrastructure that is in place should increase in value in the coming years. TC Energy operates more than 90,000 km of natural gas pipelines in Canada, the United States, and Mexico. It also has oil pipelines, gas storage, and power-generation assets.
Management is doing a good job of shoring up the balance sheet through asset sales after a major project ran over budget. TC Energy is planning to spin off the oil pipelines business, as well.
Investors who buy the stock can now get a 7.6% dividend yield. TC Energy has raised the dividend annually for more than 20 years.
The bottom line on top stocks for passive income
Enbridge and TC Energy pay attractive dividends that should continue to grow. If you have some cash to put to work, these stocks deserve to be on your radar.
