In 2025, the maximum contribution limit to a Tax-Free Savings Account (TFSA) is $7,000. Thus, to build a solid TFSA portfolio of dividend champions, investors should look for dividend-paying companies with strong fundamentals and resilient payouts. Moreover, consider companies that regularly increase their dividend payments as it reflects management’s commitment to return higher cash to their shareholders.
With that backdrop, here are three TSX stocks to build a $7,000 TFSA position and generate tax-free income for decades.
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Dividend stock #1
Speaking of dividend champions, Enbridge (TSX:ENB), with its dividend payment history of over 70 years, stands out as a compelling investment. Besides regular dividend payments, this energy transportation company raised its annual dividend at a compound annual growth rate (CAGR) of 9% in the past three decades. Moreover, Enbridge offers an attractive yield of 6%, making it a top stock to add to your TFSA portfolio for worry-free income.
Enbridge’s diversified business model, high system utilization rate, and long-term contracts position it well to deliver solid earnings and distributable cash flow (DCF). Furthermore, the company’s low-risk commercial arrangements add stability to its operations.
Enbridge will benefit from its extensive liquid pipelines business. Moreover, its natural gas transmission operations are expected to see higher demand from data centres and growing industrial activity. Furthermore, Enbridge is focusing on expanding its gas distribution and storage businesses and has a growing portfolio of renewable energy assets, which will help generate higher cash flows and drive future payouts.
Dividend stock #2
TFSA investors could consider telecom giant Telus (TSX:T) for steady dividend income. Telus has a track record of paying higher dividends through its multi-year dividend-growth program. Its ability to scale profitably and expand free cash flows drove its payouts.
Notably, this dividend champion has increased its dividend 27 times since 2011 and remains focused on rewarding its shareholders with higher payouts in the future. It targets annual dividend growth of 3% to 8% through 2028. Further, its dividend payout ratio is 60–75% of free cash flow, which is sustainable in the long run. In addition, Telus stock offers a high yield of 7.5%.
Looking ahead, Telus is focusing on diversifying its revenue and is profitably expanding its user base, which will add stability. In addition, Telus’s ability to maintain a lower churn rate and focus on reducing costs will drive earnings, supporting future payouts. The telecom company is also poised to benefit from its investments to enhance the coverage and reliability of its network through spectrum acquisitions and infrastructure upgrades, which will bode well for future growth.
Besides higher earnings, the expected moderation in capital expenditures will enable Telus to pay and increase its quarterly dividend.
Dividend stock #3
Fortis (TSX:FTS) is another top dividend stock to build a solid income-producing TFSA portfolio. This leading utility company operates a defensive business model, generating predictable cash flows. Its rate-regulated asset base has consistently driven its earnings, supporting higher dividend payouts.
For instance, the company has raised its dividends for 51 consecutive years and is likely to maintain its dividend growth streak in the coming years. Fortis’ $26 billion capital plan will expand its rate base and drive low-risk earnings, supporting higher payouts. Besides offering stress-free passive income, this utility giant has a compelling yield of 3.6%.
The company’s rate base is projected to increase at a CAGR of 6.5% through 2029, resulting in an annual dividend hike of 4% to 6% during the same period. In short, its resilient business, stellar dividend growth history, and visibility over future payouts make Fortis a dividend champion.
