Recent market volatility has Canadian investors wondering which TSX dividend stocks might be undervalued right now and good to buy for a self-directed Tax-Free Savings Account (TFSA) focused on passive income and long-term capital gains.
Fortis
Fortis (TSX:FTS) is a Canadian utility company with assets located in Canada, the United States, and the Caribbean.
The stock trades near $64 at the time of writing compared to nearly $67 in early April. It was as low as $61.50 in recent days, and is still well above the 12-month low around $51.
Fortis should hold up well in a turbulent market. The company gets nearly all of its revenue from rate-regulated businesses, which include natural gas distribution utilities, power generation facilities, and electricity transmission networks. Revenue from these assets is typically predictable and reliable, even amid uncertain economic conditions.
Fortis grows through a combination of acquisitions and organic developments. It has been several years since Fortis made its last major purchase, but consolidation in the utility sector could start to ramp up if borrowing costs decline in the next couple of years.
In the meantime, Fortis is working on a $26 billion capital program that will raise the rate base from $39 billion in 2024 to $53 billion in 2029. Revenue and cash flow growth driven by the addition of the new assets should support planned annual dividend increases of 4% to 6% over the five-year period. Fortis raised the distribution in each of the past $51 years. Investors who buy FTS stock at the current level can get a dividend yield of 3.8%. That’s lower than yields available from other TSX stocks right now, though the dividend growth will steadily boost the yield on the initial investment.
Enbridge
Enbridge (TSX:ENB) spent US$14 billion in 2024 to buy three natural gas utilities in the United States. The deals turned Enbridge into the largest natural gas utility operator in North America. Demand for natural gas is expected to rise in the coming years as tech companies build gas-fired power generation facilities to supply electricity to AI data centres. Enbridge’s extensive natural gas transmission network, along with the utilities, puts it in a good position to benefit from this trend.
The company’s core oil pipeline assets and the recent addition of an oil export terminal in Texas remain strategically important for Enbridge and the North American economy. Nearly 30% of the oil produced in Canada and the United States flows through Enbridge’s infrastructure.
Management has also expanded the renewable energy portfolio through acquisitions and major projects, which include wind and solar assets in North America and Europe.
Enbridge’s $26 billion capital program, along with revenue from the recent acquisitions, should support ongoing dividend growth. The board has raised the distribution in each of the past 30 years. ENB stock currently trades near $59 compared to a 2025 high around $65. At the current price, investors can get a dividend yield of 6.4%.
The bottom line on top stocks for TFSA passive income
Ongoing market volatility is expected to continue for some time. That being said, Fortis and Enbridge should be solid picks at current prices and deserve to be on your radar for a buy-and-hold portfolio targeting reliable and growing passive income.
