Most Canadian investors are caught by surprise by the stock market rally that occurred by the end of 2023. And some of those investors are wondering which high-quality Toronto Stock Exchange (TSX) dividend stocks are still undervalued and suitable for buying into as part of a self-directed tax-free savings account (TFSA) targeting passive income or a registered retirement savings plan (RRSP) portfolio focused on total return.
BCE (TSX:BCE) is an industry leader with a proven track record of dividend growth. The largest communications company in Canada has raised its dividend by at least 5% every year for the past 15 years. The company generates most of its revenue from its core mobile and Internet subscription business lines. And since individuals and businesses need these services regardless of the state of the economy, BCE is a good stock to buy even in a recession.
BCE shares fell from C$65 last May to below C$50 in early October as interest rates continued to rise. Economists expect the Bank of Canada to start lowering interest rates in 2024, so money may start flowing back into the stock. Shares of BCE are currently trading around C$54.50 and still look to be in oversold territory. Importantly, this stock is now offering investors a solid 7.1% dividend yield.
An energy giant with a market cap of over C$100 billion, Enbridge (TSX:ENB) is a pivotal player in the North American energy infrastructure industry. The company is responsible for transporting roughly one-third of the oil produced in Canada and the U.S. and 20% of the natural gas used by U.S. homes and businesses. Enbridge shares were trading close to C$49 in midday trading on Thursday (11 January), a rebound from C$43 in October last year, but there is still a big gap between them and the 2022 share price high of C$59.
The company just raised its 2024 dividend by 3.1 per cent, the 29th consecutive annual dividend hike by the board. Coupled with a C$25 billion capital programme and ongoing acquisitions, Enbridge is expected to continue to grow revenue and distributable cash flow in the coming years, which will support continued dividend growth. Investors who buy Enbridge stock in its current position can earn a 7.4% dividend yield.
Whether it’s Enbridge or BCE, the share price discount and such a high dividend yield won’t stay at this level. Both stocks are attractive to consider buying if you have some spare cash to deposit in a TFSA or RRSP.
