With markets sitting near record highs and valuations looking stretched in some sectors, investors are wondering which TSX stocks might still be attractive to add to a self-directed Tax-Free Savings Account (TFSA) portfolio focused on dividends and long-term total returns.
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Market outlook
The announcement of a deal between the United States and Iran to open up the Strait of Hormuz recently gave equity markets a new push to the upside. Investors hope oil tankers will finally pass freely through the narrow channel to deliver oil to the world. Roughly a quarter of global oil shipments have historically passed through the Strait of Hormuz.
Closing the waterway to tanker traffic has upset oil markets in recent months and resulted in a spike in oil prices. This, in turn, has driven up fuel costs and caused inflation to hit 4.2% in the United States in May. At the time of writing, West Texas Intermediate (WTI) oil trades for US$76 per barrel. That’s back down to a level last seen in early March, but is still way above the US$57 it fetched at the start of the year.
The U.S. economy appears to be holding up quite well, despite the spike in fuel prices. This means the Federal Reserve will likely have to raise interest rates later this year or in 2027 to get inflation back under control. A decrease in oil prices back below US$60 would ease pressure on inflation, but there is no guarantee oil prices will fall that far in the near term. It will take time for all the backlog of tanker shipments to reach their destinations. Ramping up output in the Gulf region will also take months as repairs to damaged infrastructure need to be completed.
There is also a risk that Iran and the U.S. could reverse course on their deal to end the war. This would likely cause another closure of the Strait of Hormuz and once again drive oil prices higher.
Even in the best-case scenario, oil prices will likely remain elevated through the end of the year. As such, investors should brace for higher inflation and rate hikes in both Canada and the United States heading into 2027.
Stocks to consider now
Shares of top energy stocks have pulled back from the 2026 highs, and more volatility should be expected, but higher oil prices and international demand for reliable energy supplies should continue to benefit Canadian oil producers.
Canadian Natural Resources (TSX:CNQ), for example, trades near $59 at the time of writing compared to more than $70 in March. The stock is still up 36% in the past six months, but the pullback has pushed the dividend yield back above 4%.
CNRL has increased the dividend in each of the past 26 years. You get paid well to ride out turbulence, and any additional downside would be an opportunity to add to the position.
Manulife
Manulife (TSX:MFC) trades for $57 right now, just below its recent record high. The company has been successful in its efforts to reduce risk in recent years, leading to a rally in the share price and a series of generous dividend increases.
Rate hikes from the U.S. Federal Reserve and the Bank of Canada should benefit Manulife and its insurance peers, as they will be able to earn better returns on the cash they are required to set aside to cover potential claims.
Enbridge
Enbridge (TSX:ENB) trades near $77 at the time of writing compared to the 2026 high above $80. The dip gives income investors a chance to secure a 5% dividend yield.
Rising interest rates could put pressure on the stock, as they did in 2022 and 2023, so investors should consider easing into a new position, but the long-term outlook should be positive. Enbridge has a $40 billion capital program on the go that will drive distributable cash flow (DCF) higher in the coming years to support dividend increases.
The bottom line
CNRL, Manulife, and Enbridge are industry leaders paying good dividends that should continue to grow. If you are searching for TFSA picks in the second half of 2026, these stocks deserve to be on your radar.
