Canadian dividend stocks are starting to catch a new tailwind on the expectation of continued cuts to interest rates. Investors seeking reliable passive income are wondering which top TSX dividend-growth stocks are still undervalued and good to buy for a self-directed portfolio.

Telus

Telus (TSX:T) trades near $21.50 at the time of writing compared to $34 at one point in 2022.

The steady decline over the past two years is largely attributable to the sharp increase in Canadian interest rates. Higher borrowing costs cut into profits and can reduce cash that is available for distributions. Telus uses debt to fund part of its capital program that includes the expansion of its fibre and 5G networks. The Bank of Canada is now cutting interest rates to protect the economy. As interest rates drop there should be some relief for Telus.

Telus eliminated 6,000 jobs over the past year as a measure to position the business to meet financial goals. The reduction in expenses should help the bottom line this year and in 2025. The company faced some revenue headwinds at its Telus International subsidiary last year. Price wars in the Canadian communications market have also had an effect on the stock.

Despite the challenges, Telus still delivered 7.6% growth in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2023 and is targeting adjusted EBITDA growth of 5.5% or better in 2024. Based on this outlook, the stock is probably oversold, but Telus remains a contrarian pick until a bottom emerges.

Telus has increased the dividend annually for more than 20 consecutive years. Investors who buy the stock at the current level can get a 7.2% dividend yield.

Enbridge

Enbridge (TSX:ENB) isn't as cheap as it was in early October last year when it dipped to $43 per share. Investors who got in at that point are already sitting on some nice gains, but more upside should be on the way. Enbridge trades near $50.50 at the time of writing. The stock was as high as $59 in June 2022.

Rising interest rates in Canada and the United States led to the slide in the share price in the back half of 2022 and through the first three quarters of 2023. Since then, investors have moved back into the stock as market sentiment shifted from fears of further rate hikes to anticipation of cuts.

Enbridge is targeting adjusted EBITDA growth of 7-9% annually through 2026. Distributable cash flow is expected to rise by 3% per year over that timeframe and by 5% in 2027 and beyond. Contributions from the US$14 billion acquisition of three natural gas utilities in the United States will help, along with asset growth driven by the $25 billion secured capital program.

Enbridge has expanded its portfolio in recent years. The company now owns the largest oil export terminal in Texas and is a partner in the Woodfibre liquified natural gas (LNG) facility being built in British Columbia. Global demand for North American oil and natural gas is rising as countries look for reliable supplies amid rising geopolitical risks.

Enbridge is also expanding its renewable energy assets in North America and Europe, and it is becoming a giant in the natural gas utility sector in Canada and the United States.

Investors who buy ENB stock at the current level can get a dividend yield of 7.25%. The board has increased the distribution in each of the past 29 years.

The bottom line on top stocks for passive income

Telus and Enbridge pay attractive dividends that should continue to grow. If you have some cash to put to work, these stocks deserve to be on your radar.

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