Canadian retirees and other income investors are searching for good TSX stocks to buy for a self-directed Tax-Free Savings Account (TFSA) focused on dividend income.
Fortis
Fortis ( TSX:FTS) has increased its dividend in each of the past 51 years and intends to boost the distribution annually by 4% to 6% through at least 2029. This is good guidance in these uncertain economic times and is one reason the stock has held up well amid the recent market volatility.
Fortis is up about 25% in the past year and currently trades near its 12-month high. The stock’s appeal lies in the company’s stable and predictable cash flow. Fortis operates power generation facilities, electricity transmission networks, and natural gas distribution utilities. Households and businesses need to heat their buildings and keep the lights on regardless of the state of the economy, so the stock should be good to hold through an economic downturn.
Fortis is working on a $26 billion capital program that will increase the rate base from $39 billion in 2024 to $53 billion in 2029. As the new assets are completed and go into service, the resulting jump in cash flow should support planned dividend growth. Fortis has other projects under consideration that could be added to the development program. In addition, the company has a strong track record of making strategic acquisitions to drive revenue and cash flow expansion.
Investors who buy Fortis stock at the current level can get a dividend yield of 3.7%. Higher yields are available on other TSX stocks, but the steady dividend growth makes Fortis an attractive pick.
Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS) is working through a strategy transition after underperforming its large peers in recent years.
The stock trades near $66 at the time of writing. It was as high as $93 in early 2022 before the bank sector went into an extended pullback due to aggressive interest rate hikes by the Bank of Canada and the U.S. Federal Reserve. Bank of Nova Scotia rallied last year along with other banks when the central banks stepped up rate cuts.
The subsequent decline in the share price in 2025, however, is likely due to the uncertain economic outlook for Canada and Mexico amid ongoing trade negotiations with the United States. Bank of Nova Scotia has a large presence in Mexico, along with other Latin American markets, including Peru and Chile. Under the new chief executive officer the company had already decided to scale back its focus on Latin America before the tariff hikes put in place by the new American administration. Bank of Nova recently sold its operations in Colombia, Costa Rica, and Panama and booked a loss on the transaction. Investors will have to see what the company will do with the remaining international assets.
In 2024, the bank spent US$2.8 billion to acquire a 14.9% interest in KeyCorp, an American regional bank, as part of the plan to expand the American footprint. Bank of Nova Scotia also intends to boost its presence in Quebec. It will take time for the strategy shift to deliver results, but investors with a contrarian streak can take advantage of the stock’s decline to pick up a solid 6.5% dividend yield.
The bottom line on top stocks for passive income
Fortis and Bank of Nova Scotia pay good dividends for investors seeking passive income. If you have some cash to put to work in a TFSA, these stocks deserve to be on your radar.