TFSA Wealth: Top Stocks to Buy Now for Passive Income and Total Returns

Top TSX dividend stocks are now on sale.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The latest leg of the market correction is giving dividend investors a chance to buy great Canadian dividend stocks at discounted prices for a self-directed Tax-Free Savings Account (TFSA) focused on passive income and total returns.

Bank of Nova Scotia

Bank of Nova Scotia (TSX:BNS) trades near $62 per share at the time of writing compared to $92 in early 2022.

Created with Highcharts 11.4.3Bank Of Nova Scotia PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

The significant pullback is largely due to the sharp rise in interest rates in Canada and the United States over the past 18 months, as the Bank of Canada and the U.S. Federal Reserve try to reduce inflation by cooling off the economy and loosening up the tight labour market.

Rising interest rates can boost net income margins for the banks, but the drastic move over such a short period of time is putting pressure on borrowers. Bank of Nova Scotia nearly doubled its provision for credit losses (PCL) to $819 million in the fiscal third quarter (Q3) 2023 compared to the same period last year. All the big banks are setting more cash aside to cover potential bad loans.

The number sounds large, but it is small relative to the size of the total loan portfolio, and the overall loan book remains in good shape. Bank of Nova Scotia continues to generate good profits and has built up a solid capital position to ride out the current turbulence. The board increased the dividend earlier this year. That should be a sign to investors that management is comfortable with the earnings outlook.

Bank of Nova Scotia has underperformed its Canadian peers in recent years, so the stock is a bit of a contrarian pick in the segment. A new chief executive officer took control in 2023 and is working hard to deliver better returns for investors.

At the time of writing, BNS stock provides a 6.8% dividend yield, so investors get paid well to wait for the rebound.

Fortis

Fortis (TSX:FTS) is a utility firm with $64 billion in assets spread out across Canada, the United States, and the Caribbean. The company gets 99% of its revenue from rate-regulated businesses. These include power stations, electricity transmission networks, and natural gas distribution utilities. Regardless of the state of the economy, households and businesses need electricity and natural gas. As a result, Fortis should be a good stock to own during a recession.

The company grows through development projects and acquisitions. Fortis is working on a $22.3 billion capital program that will raise the rate base by about 35% over five years. The resulting increase in cash flow should support planned annual dividend increases of 4-6% through 2027. Fortis bumped up the dividend in each of the past 49 years.

The stock currently trades near $51 compared to more than $60 in May. Investors can get a 4.6% yield right now and wait for the dividend increases to boost the return. Buying Fortis on big pullbacks has historically proven to be a savvy move for patient investors.

The bottom line on top stocks for passive income

Ongoing volatility should be expected, and more downside could be on the way. That being said, Bank of Nova Scotia and Fortis already look cheap and pay attractive dividends that should continue to grow. If you have some cash to put to work in a TFSA, these stocks deserve to be on your radar.

Should you invest $1,000 in Bank of Nova Scotia right now?

Before you buy stock in Bank of Nova Scotia, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Bank of Nova Scotia wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool recommends Bank Of Nova Scotia and Fortis. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker has no position in any stock mentioned.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

dividend growth for passive income
Dividend Stocks

Why I’d Invest in Canadian Value Stocks for Both Stability and Growth

Three Canadian value stocks are buying opportunities for investors looking for stability and growth.

Read more »

investment research
Dividend Stocks

Got $15,000? 3 Blue-Chip Stocks Every Canadian Should Consider

Here's why investing in blue-chip TSX stocks such as CNQ and CNR should derive outsized gains in 2025 and beyond.

Read more »

protect, safe, trust
Dividend Stocks

Where I’d Allocate $20,000 in 2 Safer High-Yield Dividend Stocks for Retirement Needs

Here are two safer, high-yield dividend stocks I'm looking at for my retirement needs.

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

3 Reasons I’m Considering Enbridge Stock for a $5,000 Investment This April

I'm considering Enbridge stock to provide some defensive appeal and a juicy dividend to my long-term portfolio.

Read more »

monthly desk calendar
Dividend Stocks

A 9.2% Dividend Stock Paying Cash Every Single Month

With one of the highest dividends out there, this dividend stock deserves attention in your portfolio.

Read more »

Happy golf player walks the course
Dividend Stocks

Build a Powerful Passive Income Portfolio With Just $20,000

If you are worried that the bear market could reduce your savings, these stocks can build a powerful passive income…

Read more »

Hand Protecting Senior Couple
Dividend Stocks

How I’d Use My $7,000 TFSA Contribution to Start Retirement Planning

These TSX stocks have solid fundamentals and are well-positioned to deliver significant tax-free total returns over time.

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

How to Turn Your TFSA Into a Gold Mine Starting With Only $10,000

It doesn't have to be complicated or scary. You can turn any portfolio into a major gold mine.

Read more »