Passive Income: 2 TSX Dividend Stocks That Are Still On Sale

Canadian dividend stocks retreated in 2022 and most of 2023 as the Bank of Canada aggressively raised interest rates to rein in inflation. Market sentiment began to shift last fall from fears of more rate hikes to expectations of rate cuts in 2024. Sold-out TSX dividend stocks have since rallied, but more gains should be in store, and investors who missed the rebound can still get some good deals.

Enbridge

Enbridge (TSX:ENB) is a giant in the North American energy infrastructure industry and continues to grow through a combination of strategic acquisitions and capital projects. The company is using debt to fund part of its growth program. That’s why the stock has taken a beating when interest rates have risen sharply over the past few years. It’s gotten a new boost from the Bank of Canada’s recent rate cuts and the expected U.S. rate cuts as early as next month.

Lower borrowing costs will support earnings and could free up more cash to pay shareholders. At the same time, the company is closing on the third part of its $14 billion purchase of three U.S. gas utilities in 2024. Investors will see the benefits throughout the year starting in 2025. Enbridge also has $24 billion in capital projects underway. Cash flow should increase significantly as new assets come online. Investors received a 3.1% dividend increase in 2024. Annual increases are likely to be between 3% and 5% over the next few years, in line with projected growth in distributable cash flow. Enbridge has increased its dividend for 29 consecutive years.

At the time of writing, the stock is trading around $53 compared to $59 in 2022, so there is still decent upside potential. Investors who buy ENB stock at current levels can see a 6.9% dividend yield.

Fortis

Fortis (TSX:FTS) may not offer as high a dividend yield as other stocks today, but it’s hard to ignore a history of dividend growth that consistently increases the return on your initial investment. In fact, Fortis has increased its dividend every year for each of the last 50 years and expects to increase its payout by 4% to 6% annually through at least 2028. That’s a great sign in an uncertain economic climate.

Like Enbridge, Fortis is growing through acquisitions and internal growth projects. Its current $25 billion capital program is expected to increase its rate base from $37 billion in 2023 to $49.4 billion in 2028. As new assets begin generating revenue, there should be enough cash flow growth to support planned dividend increases.

Falling interest rates will reduce debt spending and could trigger a new wave of consolidation in the utility sector. At the time of writing, Fortis shares are trading around $59 per share, down from $65 at the high point in 2022. Investors who buy at current levels could see a dividend yield of 4%.

TSX Dividend Stock Summary

Enbridge and Fortis pay good dividends that should continue to grow. If you have some cash to invest, these stocks deserve to be on your radar.