Retirees seeking passive income and other investors more focused on long-term total returns are wondering which dividend stocks in the TSX might be good to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio.
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Enbridge
Enbridge (TSX:ENB) recently hit $64 per share, a level not seen since 2015. The stock is up 29% in the past six months alone, supported by cuts to interest rates in Canada and the United States.
Despite the big move, investors can still get a dividend yield of close to 6% from ENB stock.
Enbridge completed its US$14 billion acquisition of three natural gas utilities in the United States last year. The move further diversified the asset mix and makes Enbridge the largest natural gas utilities operator in North America. Natural gas demand is expected to grow in the coming years as gas-fired power generation facilities are built to provide electricity for new artificial intelligence data centres.
Enbridge is working on a $27 billion capital program to drive additional revenue and cash flow growth. This should support ongoing dividend increases. Enbridge raised the dividend in each of the past 30 years, so investors should feel comfortable with the stability of the payout.
Given the steep rise over the past few months it would be reasonable to expect a pullback in the near term, but investors get paid well to ride out a correction and can take advantage of a dip to add to the position.
Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS) is arguably a contrarian pick among the Canadian banks. The stock is up just 2% in the past five years, compared to significant gains for most of its large peers.
A new chief executive officer took charge of Bank of Nova Scotia about two years ago. Since then, the bank has trimmed staff to reduce expenses and completed a strategic review that will significantly impact where Bank of Nova Scotia invests to drive future growth.
Previously, Bank of Nova Scotia spent billions of dollars on acquisitions in Latin America, including assets in Pacific Alliance members Mexico, Peru, Chile, and Colombia, as well as other countries. The idea was to benefit from low bank services penetration in a combined market of more than 230 million people. As the middle class expands, demand for loans and investment products should grow.
Economic volatility due to the reliance of these markets on commodity prices, along with ongoing political uncertainty, however, have been headwinds, and Bank of Nova Scotia’s shareholders have not enjoyed the anticipated returns. The other large Canadian banks have made bets on growth in the United States and, in most cases, have found more favour among investors.
Bank of Nova Scotia spent US$2.4 billion in 2024 to acquire a 14.9% stake in a U.S. regional bank to get a new foothold in the sector. The bank is also looking to expand its presence in Quebec. At the same time, Bank of Nova Scotia recently announced a deal to sell its assets in Colombia, Panama, and Costa Rica. Monetization of additional assets in Latin America could follow in the coming years as part of the transition.
Investors will have to be patient, but the stock currently provides a solid 5.7% dividend yield.
The bottom line on top stocks for dividend yields
Enbridge and Bank of Nova Scotia are good examples of TSX stocks that currently have high dividend yields. If you have some cash to put to work in a dividend portfolio, these stocks deserve to be on your radar.
