Contrarian investors are searching for undervalued TSX dividend stocks to add to their self-directed Tax-Free Savings Account (TFSA) portfolios. Buying stocks when they are out of favour takes courage and requires patience to ride out additional turbulence, but the rewards can be significant on a rebound.
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Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS) trades near $73 per share at the time of writing. The stock was as high as $93 in early 2022 and slipped as low as $60 in the past 12 months.
Recent weakness is likely due to news that Bank of Nova Scotia will take a charge of $1.4 billion on the sale of its businesses in Colombia, Costa Rica, and Panama. Investors might be concerned that other assets in Latin America that the company bought over the past two or three decades might also get monetized at a loss as the bank works through its strategy transition.
The new chief executive officer is focusing future capital expenditures on opportunities in the United States and Canada. Bank of Nova Scotia spent US$2.8 billion in 2024 to acquire a 14.9% stake in KeyCorp, a U.S. regional bank. Bank of Nova Scotia also plans to boost its presence in Quebec.
It will take time for the strategy shift to deliver results, but investors get paid well to wait. At the current share price, the dividend provides a yield of 5.8%.
TC Energy
TC Energy (TSX:TRP) is down to $66 at the time of writing from $70 in November. The stock is still up 24% in the past 12 months, so the easy money has arguably been made. Investors who are bullish on natural gas demand in the coming years, however, might consider adding TC Energy on dips.
The company spun off its oil pipeline division in 2024 to focus primarily on natural gas transmission and storage. Power generation assets are also still part of the mix. TC Energy operates more than 93,000 km of natural gas infrastructure in Canada, the United States, and Mexico, which carries roughly 30% of the natural gas used in North America. Gas-fired power generation is expected to surge as new artificial intelligence data centres get built.
TC Energy has increased its dividend in each of the past 24 years. Investors who buy ENB stock at the current level can get a dividend yield of 5%.
Northland Power
Northland Power (TSX:NPI) is down 26% in the past year and currently trades slightly above the 12-month low. The provider of wind, solar, and gas-fired power production has assets in service and under development around the globe. High interest rates and a shift in sentiment away from renewables in the past few years have impacted the sector.
The stock is down to $18 from $50 in 2021, so investors need to be careful. If you have a contrarian style, however, and are positive long-term on renewables, NPI stock might be worth a look with its dividend yield of 6.5%.
The bottom line
Near-term volatility should be expected, and additional downside is certainly possible. However, contrarian dividend investors might want to put BNS, TRP, and NPI on their radar.
