The Best Canadian Dividend Stocks to Buy and Hold Forever in a TFSA

Here are undervalued TSX dividend stocks TFSA investors can buy hold in December 2025.

Key Points
  • Cenovus Energy (TSX:CVE) is a compelling TFSA investment choice, boasting robust upstream production and significant cost reductions, with analysts predicting a rise in free cash flow and a dividend yield of 3.3%, offering a 20% discount to price targets.
  • West Fraser Timber (TSX:WFG), despite a 36% decline over the past year, presents an attractive opportunity with a 2.2% dividend yield and the potential for significant growth in free cash flow, which could double in value over three years, making it ideal for income- and value-focused TFSA investors.
  • Both companies provide strong cash flow potential and resilient dividends, making them excellent long-term holdings in a TFSA to leverage the benefits of tax-free growth and income.

The Tax-Free Savings Account (TFSA) was introduced in 2009 and has gained popularity over the past decade due to its tax-sheltered status. Any returns earned from qualified investments in this registered account are exempt from Canada Revenue Agency taxes.

So, the TFSA is an ideal account to hold blue-chip dividend stocks to benefit from steady dividend payouts and long-term capital gains. Here are the two best Canadian stocks to buy and hold forever in a TFSA.

Investor wonders if it's safe to buy stocks now

Source: Getty Images

Is this dividend stock a good buy?

Valued at a market cap of almost $47 billion, Cenovus Energy (TSX: CVE) develops, produces, refines, transports, and markets crude oil, natural gas, and refined petroleum products across Canada, the United States, and China.

The Calgary-based company operates oil sands projects in northern Alberta and Saskatchewan, owns natural gas assets, runs offshore operations, and operates refineries that convert heavy oil into gasoline, diesel, jet fuel, and asphalt.

In the third quarter (Q3) of 2025, Cenovus Energy reported its strongest quarterly upstream production on record at 833,000 barrels of oil equivalent per day. The oil sands business led the performance with 643,000 barrels per day, a new company record.

Operating costs at U.S. facilities dropped to US$9.67 per barrel, down more than US$3 from the prior year quarter. The sale of the Wood River and Borger refinery stake closed at quarter end for $1.8 billion in cash plus the elimination of $313 million in drawn credit facilities, giving Cenovus complete operational control of its remaining downstream portfolio.

Cenovus generated $2.5 billion in adjusted funds flow during the quarter and returned $1.3 billion to shareholders through dividends and share buybacks. The company repurchased 40 million shares at an average price of $22.75, totaling $918 million. Net debt stood at $5.3 billion at quarter’s end before accounting for the Wood River proceeds, which brought the balance back down to the $4 billion target level.

Analysts tracking Cenovus Energy forecast free cash flow (FCF) to increase from $2.77 billion in 2025 to $5.05 billion in 2029. In this period, its annual dividend per share is forecast to expand from $0.79 to $0.88.

The TSX dividend stock offers you a forward yield of 3.3% and trades at a discount of 20% to consensus price targets.

Is this Canadian stock undervalued?

Valued at a market cap of $6.5 billion, West Timber (TSX: WFG) is a TSX stock that is down 36% in the past year. However, this drawdown has raised the dividend yield to 2.2% in December 2025.

West Fraser Timber manufactures and distributes a range of wood products, including lumber, engineered wood, pulp, and newsprint, across North America and internationally.

The Vancouver-based company produces spruce-pine-fir and southern yellow pine lumber, oriented strand board, plywood, and medium-density fiberboard panels used in home construction and repair. It also manufactures pulp for paper products and provides bioenergy solutions.

Analysts tracking the TSX dividend stock forecast FCF to improve to $912 million in 2029, compared to an outflow of $323 million in 2025. In this period, its annual dividend per share is forecast to increase from $1.28 to $1.36.

If the mid-cap stock is priced at 12 times forward FCF, it could double over the next three years, making it a top TFSA buy for value and income-seeking investors.

Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool recommends West Fraser Timber. The Motley Fool has a disclosure policy.

More on Dividend Stocks

A meter measures energy use.
Dividend Stocks

Canadian Utility Stocks Report Soon: Should You Buy Before or After Earnings?

Canadian utility stocks report soon. See what Fortis, Emera and Canadian Utilities investors should consider before buying ahead of earnings.

Read more »

Person uses a tablet in a blurred warehouse as background
Dividend Stocks

An Ideal TFSA Stock for October, Paying 0.34% Each Month

Explore the advantages of a TFSA and discover how selecting the ideal TFSA stock can maximize your investment returns.

Read more »

shoppers in an indoor mall
Dividend Stocks

A Top-Notch 5.5% Dividend Stock Paying Cash Every Month in Retirement

Crombie REIT offers a dependable yield and a low payout ratio. Discover why it’s a top choice for monthly retirement…

Read more »

A glass jar resting on its side with Canadian banknotes and change inside.
Dividend Stocks

Dividend Income on a Small Budget: Where Canadians Can Start

Stocks like Fortis Inc (TSX:FTS) can produce substantial dividend income.

Read more »

monthly calendar with clock
Dividend Stocks

How to Use a TFSA to Generate $500 in Monthly Tax-Free Income

Need $500 a month tax free? At a 6.9% yield, about $87,000 in a TFSA could do it. See how…

Read more »

customer uses bank ATM
Dividend Stocks

TFSA Withdrawal Rules Every Canadian Investor Should Know

Beware that re‑contributing withdrawn funds in the same calendar year can lead to a penalty from potential excess contribution.

Read more »

A woman stands on an apartment balcony in a city
Dividend Stocks

A 5% Dividend Stock to Buy for $100 Every Month

Here’s a 5% dividend stock that can generate $100 every month from a large portfolio of real estate properties spread…

Read more »

woman holding steering wheel is nervous about the future
Dividend Stocks

Tax Refund or Bonus Coming? A Smart Way to Fund Your Emergency Cushion

A refund or bonus could bring your emergency fund months closer to completion and give your investments more time to…

Read more »