With $7,600 ready to deploy into the Toronto Stock Exchange (TSX), I’d take a dividend-focused approach to build an income-generating portfolio. In an environment of economic uncertainty and market volatility, dividend stocks provide both downside protection and attractive yields – essentially paying investors to be patient.
Here’s how I’d divide the capital across three TSX stocks that offer a compelling blend of value, income, and long-term potential.
Source: Getty Images
$3,000 in Bank of Nova Scotia for a high yield
Bank of Nova Scotia (TSX:BNS) is a solid holding for income investors. Currently offering a hefty 6.1% dividend yield, the stock trades at a relative discount compared to its big-bank peers. It recently resumed dividend hikes with a 3.8% increase – potentially the beginning of a new growth streak.
Despite posting a 5.7% year-over-year decline in earnings per share (EPS) last quarter and boosting loan loss provisions by 39% (or $391 million), the bank remains fundamentally sound. Much of this caution stems from economic uncertainties, including potential impacts from U.S. tariffs.
Assuming a conservative 3% earnings growth rate, the combination of yield and growth could result in total annualized returns of approximately 9% – a respectable return for a stable blue-chip bank.
$3,000 in Brookfield Infrastructure Partners for global exposure and inflation protection
Brookfield Infrastructure Partners L.P. (TSX:BIP.UN) is a top-tier infrastructure play. With a globally diversified portfolio of utilities, transport, midstream, and data assets, BIP offers both defensive characteristics and robust growth. Its cash flows are notably stable – 85% are either regulated or inflation-indexed – giving it solid downside protection.
The company targets 10%-plus growth in funds from operations (FFO) per unit and 5–9% annual cash distribution growth. It currently yields around 5.2% and holds an investment-grade credit rating (BBB+ from S&P), adding to its appeal for conservative investors.
At about $46 per unit, analysts estimate the stock is trading at a 13% discount to fair value – a rare find in today’s elevated market. Assuming a moderate 5% long-term growth rate, this investment could deliver an estimated 10% total return annually.
$1,600 in Magna International: A high-risk, high-reward bet
To round out the portfolio, I’d allocate $1,600 to Magna International (TSX:MG), a leading auto parts manufacturer. This is the riskier portion of the portfolio, but it comes with compelling turnaround potential. The stock is trading near multi-year lows, which has historically been a launchpad for strong recoveries.
Though Magna’s earnings and cash flows can be volatile due to its cyclical nature, the company has managed its capital prudently. It sports a solid A-credit rating and has increased its dividend for 15 consecutive years, which is no small feat in a boom-and-bust industry.
Its current yield of roughly 5.4% provides investors with meaningful income while they wait for a rebound. For those with patience and a long-term view, Magna offers attractive upside with manageable risk.
The Foolish investor takeaway
By diversifying across a stable bank, a global infrastructure powerhouse, and a cyclical turnaround candidate, this $7,600 TSX portfolio targets a blend of reliable income, modest growth, and opportunistic upside. In today’s uncertain economic climate, these three picks offer a defensive yet dynamic strategy to navigate the Canadian market.
