The Canadian stock market has a strong track record of long-term growth. So, when short-term volatility strikes — like the recent market correction driven by the U.S. tariff war — it often presents a golden opportunity to scoop up quality businesses at discounted prices. With the 2025 Tax-Free Savings Account (TFSA) contribution limit set at $7,000, I see this as a perfect time to focus on value stocks: companies that are trading below their intrinsic value but have strong fundamentals and long-term potential.
Here’s how I’d allocate my TFSA this year — by diversifying across high-quality, dividend-paying Canadian value stocks in different sectors.
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Brookfield Infrastructure Partners: A defensive play with growth potential
Brookfield Infrastructure Partners (TSX:BIP.UN) jumps out as a top value pick. The stock has fallen roughly 22% from its 52-week high and trades at $39.23 per unit at writing. This decline has pushed its yield to an attractive 6.3%, well above its 10-year average of 4.3%. Over that same period, Brookfield Infrastructure Partners has consistently raised its cash distribution, with a growth rate of 7.7%.
What makes BIP.UN particularly appealing is its global portfolio of essential infrastructure assets — ranging from utilities and transport to midstream energy and data infrastructure — all of which are largely inflation-linked. The company employs a smart capital-recycling strategy, buying undervalued assets and selling mature ones, which helps drive long-term value creation.
Management projects funds from operations (FFO) per unit growth north of 10% annually. With a targeted distribution growth of 5–9% and a sustainable payout ratio of 60–70%, BIP.UN offers a compelling mix of income and capital appreciation potential. I’d allocate a good chunk of my TFSA to this stock for both its defensive nature and long-term upside. The stock could return about 12% per year over the next few years.
Canadian National Railway: A backbone of the economy on sale
Another stock I’d gladly include in my TFSA is Canadian National Railway (TSX:CNR). CN Rail is a vital component of North American trade, with a rail network that connects the Atlantic and Pacific coasts of Canada to the U.S. Gulf of Mexico. Its wide economic moat, strong free cash flow, and history of dividend growth make it a reliable long-term compounder.
Like Brookfield Infrastructure Partners, CNR has also pulled back about 22% from its 52-week high, offering an opportunity for value-focused investors. At around $138 per share, it currently yields 2.6%, well above its five-year average of 1.8%, indicating an attractive entry point. Analysts estimate the stock is trading at a 15% discount to its fair value, with near-term upside potential of around 18%.
My TFSA strategy
Rather than going all-in on a single stock, I’d split my $7,000 TFSA contribution across solid dividend-paying stocks like Brookfield Infrastructure Partners and Canadian National Railway from different sectors. This approach offers diversification, steady income, and potential for capital appreciation.
To reduce timing risk, I’d use dollar-cost averaging — investing in small amounts over time. By focusing on undervalued, resilient businesses with reliable income streams, this TFSA strategy is built for long-term wealth creation.
