TSX investors are wondering which Canadian dividend stocks are now undervalued and good to buy for a self-directed Tax-Free Savings Account (TFSA) focused on passive income.
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Canadian Natural Resources
Canadian Natural Resources (TSX: CNQ) picked up a new tailwind in recent days, but the stock is still down 10% in 2025 and is off 25% in the past year.
Weak oil prices are mostly to blame for the decline. West Texas Intermediate (WTI) oil currently trades near US$64.50 per barrel compared to US$85 around this time last year. Weak demand in China and rising production in non-OPEC countries, including Canada and the United States, combined to put pressure on oil prices.
The drop in 2025 occurred as markets started to worry that trade wars could cause a global recession. This would put added pressure on fuel demand. At the same time, OPEC recently announced plans to increase supply in May, but some members will now cut production as part of a deal to keep everyone in line. That should mitigate the supply boost from the rest of the group.
CNRL reported strong results in 2024 despite the price headwinds. The company also increased output and reserves through its US$6.5 billion acquisition of Chevron Canada’s assets late last year. CNRL says it has a WTI breakeven price of US$40 to $45 per barrel, so it is still generating good margins.
The board raised the dividend twice in 2024 and recently bumped it up again for 2025. This is the 25th consecutive year of dividend increases. Investors who buy CNQ stock at the current price near $40 can get a dividend yield of 5.9%.
Bank of Nova Scotia
Bank of Nova Scotia (TSX: BNS) is down 15% in 2025. The stock trades near $65.50 at the time of writing compared to $80 in December. The pullback takes the stock back to where it was in August before the big surge triggered by rate cuts at the Bank of Canada and the U.S. Federal Reserve.
Bank of Nova Scotia is working through a strategy transition that will take time to deliver results. The bank is focusing on new growth investments in the United States and Canada and will scale back its focus on Latin America, where Bank of Nova Scotia invested billions in acquisitions over the past 20 to 30 years.
Bank of Nova Scotia recently sold its operations in Colombia, Costa Rica, and Panama. Last year, it bought a 14.9% stake in KeyCorp, a U.S. regional bank, for US$2.8 billion.
Investors will need to be patient, but the stock currently provides a dividend yield of 6.45%, so you get paid well to wait for the rebound.
The bottom line on top stocks for TFSA passive income
Near-term volatility is expected in the broader market, and these stocks could retest recent lows. That being said, CNRL and Bank of Nova Scotia already trade at discounted prices and pay good dividends that should be safe. If you have some cash to put to work in a TFSA focused on dividend income, these stocks deserve to be on your radar.
