Canadian seniors and other dividend investors are searching for reliable high-yield stocks to add to their self-directed Tax-Free Savings Account (TFSA) portfolios focused on generating steady and growing passive income.
The TSX is at a record high, but investors can still find discounted stocks with good track records of dividend expansion and solid balance sheets to ride out difficult times.
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Bank of Nova Scotia
Bank of Nova Scotia (TSX: BNS) is arguably the contrarian pick right now among the large Canadian banks as the stock has underperformed its peers in recent years. Better days, however, could be on the horizon for investors.
Bank of Nova Scotia is working through a strategy shift that will see the bank focus more growth capital on the United States and Canada, and pivot away from Latin America where the bank has made large bets over the past 20 to 30 years.
As part of the transition, Bank of Nova Scotia spent US$2.8 billion to buy a 14.9% stake in KeyCorp, an American regional bank, last year. The deal gives Bank of Nova Scotia a good platform to expand its presence in the United States. Earlier this year, Bank of Nova Scotia sold its businesses in Colombia, Costa Rica, and Panama. It still has significant operations in Mexico, Chile, and Peru. Latin America is attractive for its growth potential, but economic and political turbulence have impacted anticipated returns for Scotiabank and its investors.
Bank of Nova Scotia trades near $75 per share at the time of writing. That’s up from the 12-month low around $60, but still way off the $93 it reached in early 2022. Investors will need to be patient, but you get paid a solid 5.8% dividend yield right now to wait for the turnaround efforts to deliver results.
Telus
Telus (TSX: T) has struggled in the past couple of years as rising interest rates drove up debt expenses. This hurt profits and cut into cash that could be used to reduce debt or pay dividends. Interest rates started to drop in 2024, providing some relief, but price wars for mobile plans and revenue declines at Telus Digital (formerly Telus International) put added pressure on margins and profits.
Looking ahead, the situation should improve. Analysts expect interest rates to move lower before the end of this year or in 2026, as long as inflation doesn’t surge. Prices on mobile plans are moving higher in the Canadian market and Telus is planning to take Telus Digital private. Telus Health and Telus Agriculture and Consumer Goods are growing and could become meaningful contributors to rising revenue and profits in the coming years.
Telus expects to deliver solid financial results in 2025. Ample free cash flow is projected to support ongoing dividend growth of 3% to 8%. Investors who buy Telus at the current price can pick up a dividend yield of 7.4%. Telus trades near $22.50 at the time of writing compared to $34 in 2022.
The bottom line
Bank of Nova Scotia and Telus pay attractive dividends that should continue to grow. If you have some cash to put to work in a TFSA targeting passive income, these stocks deserve to be on your radar.
