A restoration within the share costs of oversold Canadian dividend shares may proceed for a number of months, supported by rate of interest cuts. Buyers who missed the primary leg of the bounce are questioning which prime TSX dividend shares are nonetheless undervalued and good to purchase for a self-directed Tax-Free Financial savings Account (TFSA) centered on passive earnings.

TC Power

TC Power (TSX:TRP) is up about 20% because the center of April, rising $10 per share to the present worth close to $58. This stays means off the $74 the inventory reached in 2022 earlier than aggressive charge hikes by the Financial institution of Canada and the U.S. Federal Reserve triggered a pullback in pipeline shares.

On the similar time, TC Power confronted costly delays on its 670 km Coastal GasLink pipeline challenge that noticed the funds greater than double to an estimated $14.5 billion. The corporate needed to tackle additional debt to get the challenge to the end line. Happily, TC Power reached mechanical completion on Coastal GasLink late final 12 months and expects business operations to start in 2025.

Administration has accomplished a great job of elevating money by the sale of pursuits in some belongings to cut back the debt load. TC Power introduced in $5.3 billion final 12 months by this course of and is on monitor to monetize one other $3 billion in 2024. These efforts, together with the deliberate spin-off of the oil pipelines division, go a protracted solution to shoring up the stability sheet to pursue the remainder of the capital program that may see TC Power make investments $6 billion to $7 billion yearly over the medium time period on development initiatives.

As new belongings go into service, the increase to money circulate ought to assist regular dividend development. TC Power raised the distribution in every of the previous 24 years. Buyers who purchase TRP inventory on the present degree can get a dividend yield of 6.6%.

Enbridge

Enbridge (TSX:ENB) has been up 5% up to now month. On the present worth close to $51.50, it’s closing in on the 12-month excessive simply above $52. Enbridge traded for $59 earlier than the pullback within the second half of 2022, and thru the primary three quarters of 2023, the inventory went as little as $43.

As quickly because the U.S. Federal Reserve begins to chop rates of interest this inventory may take off. Enbridge, like TC Power, makes use of debt to fund its massive secured capital program together with strategic acquisitions. Decrease borrowing bills will increase web earnings and may release additional cash for dividends.

Enbridge is within the strategy of wrapping up the third piece of its US$14 billion acquisition of three pure fuel utilities in the USA. The corporate additionally bought an oil export terminal in Texas and purchased an American photo voltaic and wind challenge developer up to now couple of years. Administration expects new belongings to drive distributable money circulate (DCF) development of three% per 12 months into 2026 after which 5% yearly for the medium time period. This could lengthen the streak of annual dividend hikes into its third decade.

Buyers who purchase ENB inventory on the present degree can get a 7.1% dividend yield.

The underside line on prime shares for passive earnings

TC Power and Enbridge pay enticing dividends that ought to proceed to develop. When you have some money to place to work in a TFSA focusing on high-yield passive earnings, these shares should be in your radar.