Almost halfway through 2026, the stock market has been a roller-coaster ride for stock market investors worldwide. The S&P/TSX Composite Index has been all over the place this year, amid pressures created by the war started by the US and Israel with Iran, and the lack of progress in peace talks. The economic pressures of the war and the closure of the Strait of Hormuz continue to elevate energy prices and inflation.
Canadian equity markets have still managed to rebound, with the benchmark index up by over 8% from its March 2026 low. In this volatile market, investors would be smart to be selective with how they invest using their Tax-Free Savings Accounts (TFSAs).
If a sharp decline happens, it will be followed by another panic-stricken sell-off frenzy. Something like that can tank share prices across the board and result in potentially permanent erosion of valuable TFSA contribution room.
In a market like this, focusing on blue-chip stocks with resilient business models, solid fundamentals, and the ability to weather market cycles is the best possible move to generate more returns while reducing the overall risk to your portfolio.
With that in mind, I will discuss a Canadian banking stock with a strong business outlook and long-term growth prospects that can fit the bill.
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Bank of Nova Scotia
Also called Scotiabank, Bank of Nova Scotia (TSX:BNS) is one of Canada’s Big Six banks. The $130.84 billion market-cap financial services firm has significant commercial, personal, corporate, and investment banking operations across Canada, the U.S., the Caribbean, and Latin America.
It is a well-capitalized bank with an internationally diversified revenue stream that reduces the impact of domestic market volatility and economic cycles. Supported by a solid business model, healthy earnings, and steady cash flows, the bank can comfortably support its quarterly dividends.
Scotiabank has paid its investors their quarterly dividends without fail for the last 193 years, having increased the payouts at a 4.7% 10-year annualized growth rate. As of this writing, it trades for $106.16 per share and pays $1.10 per share each quarter, translating to a 4.14% annualized dividend yield.
February 2026 saw Scotiabank deliver its first-quarter results for the fiscal year. In the quarter, its adjusted return on equity increased by 13% year over year. This quarter also saw its adjusted earnings per share increase by 16.5% from the same period in the previous year.
Foolish takeaway
In recent years, Scotiabank has been decreasing its exposure to the riskier Latin American market. Instead, it is focusing on growing its presence in higher-margin markets in North America. The move can improve its consistency in cash flows and stable earnings growth for the long run. Even if market downturns drag its share prices down, it is well-capitalized enough to weather the storm and emerge stronger on the other side.
Given its diversified operations, improving profitability, an attractive dividend yield, and healthy long-term growth prospects, I believe Scotiabank stock can be an excellent holding to consider for your self-directed TFSA portfolio, especially amid such a volatile market environment.
