Pensioners and other dividend investors are searching for top TSX stocks to add to their self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolios focused on income and long-term capital gains.
The Bank of Canada will likely keep interest rates on hold through the end of the year if inflation doesn’t surge and the economy remains in decent shape. Many analysts expect the next move be the central bank to be to the upside, citing bigger risk of inflation, than risk of an economic downturn.
With this scenario in mind, it makes sense to consider companies that should benefit if rates remain stable or start to move higher.
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Bank of Nova Scotia
Bank of Nova Scotia (TSX: BNS) trades near $110 per share at the time of writing. The stock is at a record high and is up more than 50% in the past 12 months.
The rebound is a relief for long-term holders of the stock who watched it underperform its peers for several years. Bank of Nova Scotia is making progress on a turnaround plan that is shifting capital investment away from Latin America, where the bank spent billions over the past three decades, to focus on the United States and Canada.
Bank of Nova Scotia sold its operations in Colombia, Panama, and Costa Rica and purchased a 14.9% stake in KeyCorp, an American regional bank. The company still has large operations in Mexico, Chile, and Peru. Investors will want to keep an eye out for potential monetization announcements in these markets over the medium term.
Bank of Nova Scotia’s stock surge is supported by improvements to its return on equity (ROE), as well as earnings growth driven partly by streamlining operations across the businesses. Further ROE improvements should support further gains in the stock price.
On the rate front, steady interest rates will enable variable-rate borrowers to plan investments or pay down debt. A rate hike would put pressure on borrowers with too much debt, but higher interest rates also tend to boost banks’ net interest margins. This can offset the negative impact of higher provisions for loan losses.
Investors who buy BNS stock at the current level can pick up a solid 4% dividend yield.
Manulife
Manulife (TSX: MFC) is another stock that went through some tough times, but is on a roll after a multi-year turnaround effort. The insurance and wealth management firm took a big hit during the financial crisis due to heavy losses tied to U.S. annuity products. At the time, the company cut the dividend by 50% in order to preserve capital. This launched the long restructuring plan that saw management derisk the business by reducing exposure to volatile moves in equity markets.
Manulife is now on sound footing. The company has been buying back stock over the past few years, while also raising the dividend. The company recently raised the dividend by 10%.
Manulife and its insurance peers got a nice boost when the Bank of Canada and the U.S. Federal Reserve hiked interest rates to get inflation under control. Rate cuts that occurred in the past two years have still left rates elevated compared to where they were before and during the pandemic.
Insurance companies have to keep large amounts of cash available to cover potential claims on their policies. The jump in interest rates enabled Manulife to generate better returns on these funds. A change of 1% might not sound like much, but the impact is significant when you are talking about billions of dollars.
Manulife’s wealth management operations have benefitted from strong equity markets in the past three years. Its international operations are also performing well, with Asia delivering an 18% gain in core earnings in 2025 compared to 2024.
The bottom line
Bank of Nova Scotia and Manulife pay good dividends that should continue to grow. If you have some cash to put to work, these stocks deserve to be on your radar.
