The Tax-Free Savings Account (TFSA) limit is $7,000 for 2025. Canadian retirees with some cash to put to work in a self-directed TFSA focused on dividends are wondering which top TSX stocks might be good to buy right now for a portfolio targeting passive income.
Enbridge
Enbridge (TSX:ENB) rallied more than 25% in 2024 and now trades near its 12-month high.
Most of the gains occurred in the past six months as investors cheered cuts to interest rates by the Bank of Canada and the U.S. Federal Reserve. The central banks are expected to reduce rates even further in 2025 in order to navigate a soft landing for the economy as the impact of rate hikes through 2022 and 2023 continues to work through the system.
Enbridge uses debt to fund its growth program, so the reduction in borrowing costs is good news for investors who previously worried that the company might have to trim the dividend to preserve cash.
Looking ahead, Enbridge has a $27 billion capital plan on the go that will drive revenue and cash flow growth in the next few years. This should support additional dividend increases. Enbridge raised the dividend in each of the past 30 years. Investors who buy ENB stock at the current level can get a dividend yield of 6.2%.
Fortis
Fortis (TSX:FTS) is another example of a top TSX dividend stock with a great track record of distribution growth. The board recently increased the dividend by 4.2% for 2025. This is the 51st consecutive annual dividend hike.
Fortis operates utility businesses in Canada, the United States, and the Caribbean. The company gets nearly all of its revenue from rate-regulated assets, including natural gas distribution utilities, power-generation facilities, and electricity transmission networks. This makes cash flow predictable and reliable.
Fortis is working on a $26 billion capital program that will raise the rate base from $38.8 billion in 2024 to $53 billion in 2029. Management plans to increase the dividend by 4% to 6% per year over the next five years. Investors who buy Fortis at the current price below $60 can get a 4.1% dividend yield.
Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS) is up more than 20% in the past year to $77 but still trades way below the $93 it reached in early 2022.
Bank stocks saw their provisions for credit losses (PCL) increase considerably in the past two years as rising interest rates put pressure on businesses and households with too much debt. Now that rates are falling again, there is an expectation in the market that PCL will decline in the coming quarters. This should boost income and could lead to more upside for bank stocks.
Bank of Nova Scotia is in the early stages of a strategy shift that will see the bank invest more growth capital in the United States and Canada. It will take some time for the benefits to materialize, but investors get paid well to wait. At the time of writing, BNS stock provides a dividend yield of 5.5%.
The bottom line on top TSX dividend stocks
Enbridge, Fortis, and Bank of Nova Scotia pay good dividends that should continue to grow. If you have some cash to put to work in a TFSA focused on dividend income, these stocks deserve to be on your radar.
