While the equity markets have staged an impressive rally in 2023, there are several beaten-down TSX stocks trading at a discount to their intrinsic value. Given the stock market outpaces inflation over time, it makes sense to view every major dip as a buying opportunity for long-term investors.
Moreover, several undervalued TSX stocks pay you a tasty dividend. As share prices and dividend yields are inversely related, potential investors can benefit from attractive yields amid the market turmoil.
Holding blue-chip dividend stocks in a TFSA (Tax-Free Savings Account) is a sound strategy, as any returns in the form of capital gains or dividends are exempt from Canada Revenue Agency taxes.
Here are three such cheap TSX dividend stocks that could rally in 2024.
Enbridge stock
Down 22% from all-time highs, Enbridge (TSX: ENB) currently offers shareholders a tasty dividend yield of 7.6%. Enbridge is a Canada-based energy infrastructure heavyweight, and its stable cash flows have allowed the company to raise its dividend for 28 consecutive years. Moreover, these payouts have risen by 10% annually, showcasing the resiliency of its business model and cash flows. In fact, it has now paid shareholders a dividend for 68 years.
Enbridge owns and operates a wide network of pipelines that help it transport natural gas, natural gas liquids, and other commodities across North America. Its low-risk business model allows the company to generate stable cash flows, which are backed by rate-regulated structures and tied to long-term contracts.
Enbridge recently inked a deal to acquire three natural gas utilities, shifting its earnings mix toward lower-carbon energy and improving cash flow stability. It continues to invest heavily in capital expenditures, which should allow Enbridge to expand cash flows and support future dividend hikes.
Priced at 16 times forward earnings, Enbridge stock trades at a discount of 15% to consensus price target estimates.
Brookfield Renewable Partners stock
A clean-energy giant, Brookfield Renewable (TSX: BEP.UN) offers you a forward yield of 5.5%. It has increased dividends by at least 5% annually in the past decade.
Brookfield Renewable’s widening base of cash-generating assets across hydro, wind, solar, and energy storage help it generate steady cash flows, which are backed by fixed-rate power-purchase agreements, or PPAs.
Brookfield Renewable estimates to grow cash flows by at least 10% through 2028 on the back of organic growth, margin improvements, and acquisitions. This visible growth profile should allow it to increase dividends between 5% and 9% annually in the next few years.
Toronto-Dominion Bank stock
The final TSX dividend stock for your TFSA is Toronto-Dominion Bank (TSX: TD), one of the largest banks in North America. A Canada-based bank, TD also has a significant presence on the east coast south of the border.
Canadian banks, including TD, are quite conservative, which suggests they may not grow at a similar clip compared to their counterparts in the United States. But this cautious lending approach has meant the big Canadian banks are equipped with strong balance sheets, allowing them to maintain dividend payouts across market cycles.
TD Bank has a common equity tier-one ratio of 15.2%, the highest in North America. This ratio measures the ability of a bank to withstand adverse economic conditions, and a higher ratio is preferred.
Priced at 10 times forward earnings, TD Bank offers you a tasty dividend of 4.6%. The TSX bank stock also trades at a discount of 10% to consensus price target estimates.
