The Tax-Free Savings Account (TFSA) limit is $7,000 in 2025. Investors with some cash to put to work in a self-directed TFSA focused on dividends for passive income are wondering which stocks might be attractive right now, with the TSX trading near record highs.
Enbridge
Enbridge (TSX:ENB) is on a stellar run. The stock is up 35% in the past year and now trades above the previous high it hit in 2015.
The energy infrastructure giant is benefitting from a number of new tailwinds.
The decline in interest rates that occurred in Canada and the United States over the past six months is helping reduce debt expenses. Enbridge uses debt to fund part of its growth program, which includes acquisitions and capital projects. Lower borrowing costs can free up more cash for dividends and debt reduction.
Enbridge is working on a $27 billion capital program that will combine with recent acquisitions to drive revenue and cash flow expansion in 2025 and the coming years. This should support steady dividend increases. Enbridge raised the dividend in each of the past 30 years.
The Trump administration appears to be keen on boosting oil and natural gas production in the United States. This bodes well for Enbridge. The company’s extensive oil and natural gas transmission network and its export facilities place the company in a good position to benefit from production growth.
The stock has had a good run, so investors should expect to see a pullback at some point in the near term. However, you can still get a 5.8% dividend yield on ENB stock. Any meaningful downside would be an opportunity to add to the position.
Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS) hasn’t delivered the returns investors hoped for over the past several years. As a result, the board put a new chief executive officer in place in 2023 to take the business in a new direction. Bank of Nova Scotia is now working on a turnaround plan that will see growth capital go to the United States and Canada instead of to Latin America, where big bets over the past few decades haven’t delivered the desired results.
Bank of Nova Scotia spent US$2.8 billion in 2024 to acquire a 14.9% stake in KeyCorp, a U.S. regional bank. The move gives Bank of Nova Scotia a platform to expand its American presence. The company is also looking to grow its operations in Quebec, where the bank sees good long-term opportunities.
Divestitures of the non-core international businesses are now underway. Bank of Nova Scotia recently announced a deal to sell its businesses in Colombia, Costa Rica, and Panama. The bank also has large operations in Mexico, Peru, and Chile. Mexico will likely remain strategically important, but monetization of the assets in Chile and Peru wouldn’t be a surprise. This would free up capital that could be used for new acquisitions in the United States.
It will take some time for the transition efforts to deliver results, but investors can currently collect a solid 5.75% dividend yield while they wait.
The bottom line on TFSA dividend stocks
Enbridge and Bank of Nova Scotia are good examples of high-yield dividend stocks that should continue to raise the distributions. If you have some TFSA cash to put to work, these stocks deserve to be on your radar.