A tax-free savings account (TFSA) allows investors to earn tax-free returns on a specified amount called the contribution limit. The Canadian Revenue Agency has fixed this year’s contribution limit at $7,000. Accordingly, investors interested in earning a stable, tax-free passive income for life can add the following three quality dividend stocks to their TFSA.
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Enbridge
Enbridge (TSX: ENB) operates a regulated energy midstream business underpinned by a tolling framework and take-or-pay contracts. Additionally, its low-risk, rate-regulated natural gas utility business and power purchase agreement-backed renewable assets shield its financials from commodity price fluctuations and economic cycles, thus generating stable and reliable cash flows. Supported by these healthy cash flows, the company has paid dividends for 70 years and has also increased its dividends at an annualized rate of 9% since 1995. Its quarterly dividend payout of $0.9425/share translates into a forward dividend yield of 5.8%.
Global energy demand could grow at an 8% CAGR (compound annual growth rate) through 2040, thus expanding the demand for Enbridge’s services. Meanwhile, the company continues to expand its asset base and hopes to put $23 billion of assets into service over the next three years. Amid these growth prospects, the company’s management expects 7–9% annualized growth in its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) through 2026 and 5% thereafter. Considering its regulated underlying business and healthy growth prospects, Enbridge could continue paying dividends at a healthier rate, thus making it an ideal long-term buy.
Fortis
Given its regulated utility business and consistent dividend growth for 51 years, Fortis (TSX: FTS) is my second pick. The company operates regulated electric and natural gas utility assets, serving 3.5 million customers. With 99% regulated assets, the company’s financials are less susceptible to economic cycles and market volatility. Supported by these reliable financials, the company has raised its dividends consistently and currently offers a forward dividend yield of 3.7%. Notably, the utility company has delivered an average shareholder return of 10.3% in the last 20 years.
Moreover, Fortis is expanding its utility assets through a $26 billion capital investment plan. This five-year plan spans from 2025 to 2029 and could increase its rate base at an annualized rate of 6.5% to $53 billion. Additionally, customer rate revisions, improving operating efficiencies, and falling interest expenses amid lower interest rates could drive Fortis’s financials in the coming years. Driven by these healthy growth prospects, Fortis’s management expects to raise its dividends by 4–6% annually through 2029.
Bank of Nova Scotia
Bank of Nova Scotia (TSX: BNS) is my third pick. The Toronto-based company offers financial services in over 20 countries. Given its diversified revenue streams and widespread geographical presence, the bank generates reliable cash flows, allowing it to pay dividends consistently since 1833. Its quarterly dividend payout of $1.06/share translates into a forward dividend yield of 6.1%.
Meanwhile, BNS has been focusing on strengthening its footprint in the North American market and has acquired a 14.9% stake in KeyCorp. The acquisition could contribute around $71 million to its adjusted net income in the second quarter of fiscal 2025. Besides, the bank is scaling back its Latin American operations to improve its operating margin in the international market. It has transferred its retail banking operations in Panama, Costa Rica, and Colombia to Davivienda and, in return, has acquired a 20% stake in Davivivenda. The management expects an improvement in its operating metrics with this transaction. Considering all these factors, I believe BNS could continue rewarding its shareholders with healthy dividends, making it an ideal buy for income-seeking investors.
