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TFSA Investors: 2 Top Canadian Dividend Stocks to Buy Right Now

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The economic expansion underway has led to most Canadian companies trading on the TSX recovering to pre-pandemic valuations. Several TSX stocks have even reached new all-time highs in the booming market. With most stocks playing at new heights, it can be challenging to find undervalued stocks that can still offer you decent dividend yields.

There still are Canadian dividend payers that you could invest in provided you know where to look. I will discuss two undervalued dividend stocks that should be on your radar right now.

Algonquin Power

Algonquin Power (TSX:AQN)(NYSE:AQN) is one of the top undervalued Canadian dividend stocks that you can consider right now. The renewable energy utility company has over US$15 billion of diversified renewable energy assets, including wind, solar, and hydroelectric facilities located in North America.

The company’s first-quarter results for fiscal 2021 were robust. AQN reported an adjusted EBITDA increase of 17% and adjusted net revenue increase by 21% compared to the first quarter in 2020.

Algonquin has enjoyed substantial growth through its strategic acquisitions over the years. The company’s board has a positive outlook for 2021, and it recently raised dividends by 10%. The renewable power utility enjoyed a strong rally in the second half of last year but pulled back slightly over the last two months.

It could be an ideal opportunity to pick up shares for a discount. At writing, the stock is trading for $19.20 per share and boasts a 4.32% dividend yield.

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TC Energy

TC Energy (TSX:TRP)(NYSE:TRP) is an energy sector operator that provides natural gas storage, transmission, power generation, and oil transportation services in Canada, the U.S., and Mexico. The company recently secured a $20 billion secured capital program through 2024, and it has $6 billion tied up in projects under development.

The company receives most of its comparable EBITDA through long-term contracts or rate-regulated assets, allowing Algonquin to make predictable income. Generating predictable revenues means that it can comfortably finance dividend payouts to its shareholders.

TC Energy also reported strong first-quarter earnings for fiscal 2021. The natural gas transmission segment also has a more optimistic outlook as countries worldwide turn to natural gas as a viable alternative to coal and oil to produce power.

Governments from many countries are focusing on shifting to completely renewable energy production. Until sufficient infrastructure for green energy can be put into place, natural gas could offer an ideal transition phase.

At writing, TC Energy is trading for $61.95 per share, and it boasts a juicy 5.62% dividend yield. It could be worth adding to your portfolio for massive gains in the future while you let its payouts line your account balance with dividend income.

Foolish takeaway

Creating a portfolio of reliable dividend stocks in your Tax-Free Savings Account (TFSA) can help you generate tax-free and passive income to grow your account balance. You can withdraw the dividends to supplement your active income or reinvest your returns to unlock the power of compounding and accelerate your wealth growth.

Algonquin Power and TC Energy are industry leaders that pay out a generous amount to shareholders that could be ideal additions to your TFSA for this purpose.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in any of the stocks mentioned.

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