If you’re building your Tax-Free Savings Account (TFSA) portfolio for the long term, you may want to focus on stocks that don’t just survive market volatility but come out stronger. And if they can reward you with reliable dividends while you wait for that growth, even better.
One such opportunity seems to be right in front of us today — a top Canadian banking giant that’s consistently raised its dividend and weathered every downturn. Yet, it’s still trading at a price that makes it look undervalued, especially based on its long-term growth prospects.
In this article, I’ll highlight why this dividend champion, Bank of Nova Scotia (TSX:BNS), could be a top stock for TFSA investors looking for a dependable wealth builder.
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An undervalued dividend gem
Despite a sharp rally in the TSX Composite Index so far in 2025, Scotiabank stock has remained largely unchanged. As a result, it now trades at $77.27 per share and its market cap stands at around $96.1 billion. With a solid annualized dividend yield of nearly 5.7%, it offers investors an attractive combination of passive income and potential long-term upside.
In the second quarter of its fiscal 2025 (ended in April), the bank posted a 9% YoY (year-over-year) jump in its total revenue to $9.08 billion with the help of growth in both its interest and non-interest income. Scotiabank’s net interest income rose to $5.27 billion, showing the strength of its core lending business despite macroeconomic uncertainties.
However, Scotiabank’s adjusted earnings fell slightly on a YoY basis to $1.52 per share last quarter due largely to higher provisions for credit losses. These provisions, meant to guard against bad loans, surged to $1.4 billion from just over $1 billion a year ago. Nevertheless, it is important to note that this increase wasn’t due to actual loan defaults but more as a precaution due mainly to a more cautious view of the economy going forward.
Focused strategy and long-term game plan
What makes Scotiabank even more attractive now is how it’s doubling down on its long-term growth strategy. The bank is currently focusing on strengthening client relationships and boosting efficiency. Meanwhile, it’s also taking steps to control what it can in a mixed economic environment, while still investing in areas that support future growth.
For example, its global wealth management segment delivered 17% YoY earnings growth in the latest quarter with the help of higher mutual fund fees and rising interest income. Even its capital markets division showed a 10% YoY bump in net income, showing progress across various business units.
Why it could be a great investment for TFSA investors
So, why does all this matter for TFSA investors? Because in a tax-free account, reliable dividend income and long-term capital appreciation work together to compound wealth faster. And Scotiabank, as a true dividend champion, offers just that today.
Its yield is well above average. Also, BNS stock is showing early signs of a turnaround. While some short-term pressures remain due to an unstable macroeconomic scenario, the bank’s broader growth trajectory remains promising. That’s why, for TFSA investors who prefer owning a high-quality stock that pays them to wait and still offers healthy upside potential, Scotiabank looks like a top stock to consider right now.
