In the realm of dividend investing, Canadian retirees and savvy investors are on the lookout for top TSX dividend-paying stocks that not only offer high yields but are also considered undervalued amidst the recent market rally. These stocks could be valuable additions to a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio, catering to those focused on generating passive income or achieving substantial total returns.


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Telus: Navigating the Communications Landscape

Telus (TSX:T), a major player in the Canadian communications sector, stands out with its wireless and wireline networks providing a spectrum of services, including mobile, internet, and TV, to businesses and households across the country. Despite trading below $24 per share at the time of writing, a notable dip from its peak of over $34 in 2022, Telus's strategic positioning makes it an intriguing prospect for investors.


The recent decline in Telus's stock value can be attributed to the aggressive interest rate hikes by the Bank of Canada in its endeavor to curb inflation. Higher interest rates, intended to cool off the economy, impact companies like Telus that rely on debt for capital initiatives. However, with expectations of the Bank of Canada cutting interest rates in 2024, Telus may find relief, potentially attracting investors back to the stock.


Telus, adapting to challenging conditions, underwent a staff reduction of about 6,000 in 2023. The company's Telus International subsidiary faced difficulties, but it contributes only about 10% to overall earnings. Despite the challenges, Telus is expected to deliver consolidated revenue growth near 10% in 2023, and the recent dividend hike, a tradition for over two decades, puts the current dividend yield at an attractive 6.3%.


Enbridge: Powering Through Pipeline Networks

Enbridge (TSX:ENB), renowned for its extensive oil pipeline network, remains a crucial player in moving a significant portion of the oil produced in Canada and the United States. Additionally, Enbridge's natural gas transmission pipelines play a vital role in supplying about 20% of the natural gas used in American homes and businesses.


While Enbridge faced downward pressure on its share price due to interest rate hikes, the company has diversified its growth investments. Recent endeavors include the acquisition of an oil export terminal in Texas, a stake in the Woodfibre liquified natural gas (LNG) export facility, and expansion in solar and wind assets. The company's overall business performance in 2023 was robust, with a $25 billion capital program and acquisitions expected to drive growth in revenue and distributable cash flow.


Enbridge boasts an impressive track record of increasing dividends for 29 consecutive years, presenting investors with a current dividend yield of 7.5%. Similar to Telus, the recent challenges faced by Enbridge's share price are closely tied to interest rate hikes, and any indication of rate reduction by the Bank of Canada could provide support for ENB stock.


The Bottom Line on Undervalued Dividend Stars

Telus and Enbridge emerge as compelling options for investors seeking both high dividends and potential for growth. These undervalued TSX dividend stars offer attractive yields and solid prospects for the future. For those with available cash looking to fortify their portfolios, Telus and Enbridge stand out as promising choices worth considering in the dividend investing landscape.