Retirees and other income investors are wondering which TSX stocks are attractive to buy right now for a self-directed Tax-Free Savings Account (TFSA) portfolio focused on dividends.
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Fortis
Fortis (TSX:FTS) is up 20% in the past year and trades close to its 12-month high.
The company operates power generation, natural gas distribution, and electricity transmission businesses in Canada, the United States, and the Caribbean. These assets generate rate-regulated revenue that tends to be predictable and reliable.
Fortis grows through a combination of capital projects and strategic acquisitions. The current $26 billion capital program is expected to raise the rate base from $38.8 billion in 2024 to $53 billion in 2029. As the new assets go into service, the boost to cash flow should support planned dividend increases of 4% to 6% per year over the coming five years. Fortis has increased the distribution annually for the past 51 years.
Investors who buy Fortis stock at the current level can get a dividend yield of 3.9%. Better yields are available from other stocks, but the dividend growth quickly raises the return on the initial investment.
Enbridge
Enbridge (TSX:ENB) has also had a nice run, rising nearly 40% in the past 12 months. The energy infrastructure giant completed its US$14 billion purchase of three American natural gas utilities in 2024. Revenue from these assets, along with contributions from the $27 billion capital program, will help drive anticipated annual growth in distributable cash flow of about 3% over the medium term. Enbridge’s oil and natural gas transmission infrastructure and investments in export facilities position the business to benefit from anticipated growth in global demand for North American energy.
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 5.8%.
Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS) had a nice run last fall but has since given back some of the gains. Contrarian investors who think the stock is now undervalued can now pick up a dividend yield of 5.8%.
Bank of Nova Scotia is working through a strategy transition, shifting growth investments away from South America to focus more on the United States and Canada. The bank spent US$2.8 billion in 2024 to acquire a 14.9% interest in KeyCorp, a U.S. regional bank. The deal gives Bank of Nova Scotia a good platform to expand its presence in the U.S. market. In addition, Bank of Nova Scotia started the process of selling some international assets. The company recently announced a deal to exit its businesses in Colombia, Panama, and Costa Rica. Bank of Nova Scotia booked a loss on the dispositions, which has contributed to the downward pressure on the stock.
Investors will need to be patient, but the dividend pays you well to wait for the rebound.
The bottom line on top stocks for passive income
Fortis, Enbridge, 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 passive income, these stocks deserve to be on your radar.
