The Tax-Free Savings Account (TFSA) limit in 2025 is $7,000. This gives retirees some extra investing room to generate tax-free passive income to complement their work and government pensions.
Rates offered on Guaranteed Investment Certificates are a lot lower at the start of 2025 than they were at this time last year. As a result, investors are shifting back into top TSX dividend stocks to get better yields.
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Enbridge
Enbridge (TSX: ENB) is up 27% over the past year and recently hit a high not seen since 2015.
Enbridge uses debt to fund part of its growth program, which includes acquisitions and capital projects. Higher debt expenses triggered by a jump in borrowing costs can cut into profits and reduce cash that is available for payouts. This is why the stock declined in 2022 and 2023, as the Bank of Canada and the U.S. Federal Reserve drove rates higher to get inflation under control.
The energy infrastructure giant’s share price has since recovered from the pullback as a result of falling interest rates in Canada and the United States in the past six months.
Additional rate cuts in the United States might be put on hold in 2025 if inflation drifts higher. In Canada, the central bank might have to slow down its pace of rate cuts, as well. As such, investors might see some headwinds for additional upside in Enbridge’s share price.
That being said, the dividend looks safe and should continue to grow in step with the anticipated expansion of distributable cash flow driven by higher revenue from recent acquisitions and the $27 billion capital program.
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%.
Bank of Nova Scotia
Bank of Nova Scotia (TSX: BNS) trades near $74 at the time of writing. The stock is up 16% in the past year but still sits well below the $93 it reached in early 2022.
Scotiabank underperformed its large Canadian peers over the past five years, largely due to the international business focused in Latin America. Bank of Nova Scotia previously spent billions of dollars to build a significant presence in Mexico, Chile, Peru, and Colombia in a bet on the growth of the middle class across the four members of the Pacific Alliance trade bloc.
Political and economic volatility, however, are ongoing issues in these markets and investors have preferred to invest in the other Canadian banks that focused more on the United States in recent years.
Looking ahead, Bank of Nova Scotia is pivoting its strategy under a new CEO. The bank spent US$2.8 billion in 2024 to take a 14.9% state in an American regional bank. Bank of Nova Scotia also just announced a deal to sell its operations in Colombia, Panama, and Costa Rica. Additional monetization in Latin America could be on the way.
It will take some time for the turnaround efforts to deliver results, but Bank of Nova Scotia remains very profitable and investors get paid well to wait for a recovery. At the current share price, the stock provides a dividend yield of 5.7%.
The bottom line on TFSA income
Enbridge and Bank of Nova Scotia pay good dividends for a TFSA portfolio focused on passive income. If you have some cash to put to work, these stocks deserve to be on your radar.
