Retirees and other Canadian dividend investors are searching for good TSX stocks to buy inside their self-directed Tax-Free Savings Account (TFSA) portfolios. Yields have come down this year as share prices rebounded, but investors can still find decent deals with attractive returns.
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TC Energy
TC Energy (TSX:TRP) raised its dividend in each of the past 24 years. The stock is up about 20% in 2024, but more gains could be on the way. The shares trade near $62.50 at the time of writing, compared to $74 at the peak in 2022 before the Bank of Canada and the U.S. Federal Reserve aggressively increased interest rates.
TC Energy’s new 670-kilometre Coastal GasLink pipeline is expected to start generating revenue next year. In addition, the company plans to invest at least $6 billion per year on capital projects over the medium term. As new assets go into service, cash flow should rise enough to support ongoing dividend increases.
Investors who buy TRP stock at the current level can get a dividend yield of 6.1%.
Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS) trades near $73 at the time of writing compared to the 12-month low of around $55 but is still way off the $93 it reached in early 2022. The bank recently announced a US$2.8 investment in KeyCorp, a U.S. regional bank. The 14.9% stake gives Bank of Nova Scotia a base to grow its American presence as part of a strategy shift that will see more capital deployed in Canada, the United States, and Mexico.
Bank of Nova Scotia’s operations in South America arguably offer good growth potential as the middle class expands, but shareholders have not benefitted from the big bets in Chile, Colombia, and Peru. Economic and political volatility in these countries remain a concern. As Bank of Nova Scotia redirects investment to the North American markets, interest in the stock could rise.
Investors who buy now can get a 5.8% dividend yield and wait for the new strategy to deliver results.
Fortis
Fortis (TSX:FTS) increased its dividend in each of the past 50 years and plans to raise the distribution annually by 4-6% through at least 2028. The company is working on a $25 billion capital program that will boost the rate base from $37 billion in 2023 to more than $49 billion over five years. Rising cash flow from the new assets should support the dividend growth.
Fortis trades near $60.50 at the time of writing compared to $65 at one point in 2022. At the current price, investors can get a dividend yield of 3.9%. That’s low compared to many other dividend stocks, but the steady growth in the distribution raises the yield on the initial investment. As interest rates continue to decrease, the stock should trend higher.
The bottom line on top TSX dividend stocks
TC Energy, Bank of Nova Scotia, and Fortis are good examples of top TSX dividend stocks that should continue to raise their distributions. If you have some cash to put to work in a TFSA focused on passive income, these stocks deserve to be on your radar.
