Amid evolving retirement planning, Canadian seniors are increasingly looking beyond the Canada Pension Plan (CPP) and Old Age Security (OAS) to build tax-efficient passive income. By holding top dividend stocks within a Tax-Free Savings Account (TFSA), retirees can generate income that doesn’t impact their eligibility for federal benefits or push them into a higher tax bracket.
Two Toronto Stock Exchange giants, Bank of Nova Scotia (TSX: BNS) and Enbridge, are currently in focus for their attractive dividend yields and potential for growth, offering a compelling proposition for risk-averse investors.
The TFSA stands out as a critical tool for retirement planning. With the annual contribution limit rising to $7,000 in 2025, the cumulative contribution room now reaches $102,000. All investment income—including interest, dividends, and capital gains—accumulates tax-free inside a TFSA. This allows for full retention and compounding of returns.
Crucially for OAS recipients, TFSA income is not considered in the calculation for the OAS recovery tax, providing a significant advantage over non-registered accounts.
While its stock has underperformed some of its Big Six peers, Bank of Nova Scotia offers a compelling 4.9% dividend yield. The bank is in the midst of a significant strategic shift, reallocating growth investments to its domestic and U.S. markets while scaling back its decades-long expansion in Latin America. This repositioning is accompanied by a strong focus on enhancing operational efficiency and cost control.
Early signs of progress are emerging. The bank’s Q3 fiscal 2025 earnings reported an increase in adjusted net profit to $2.52 billion, up from $2.19 billion a year earlier. As its strategic overhaul continues, market watchers anticipate a potential re-rating of the stock.
Enbridge, a leader in energy infrastructure, presents a robust case for income stability. The company has raised its dividend for 30 consecutive years, and even after a significant share price rally, it still offers a substantial 5.7% yield. The current share price of around $66 marks a strong recovery from its low of $44 in October 2023.
A declining interest rate environment is easing financial pressure on capital-intensive firms like Enbridge, which relies on debt to fund major projects. The company is executing a massive $32 billion capital program, with new projects expected to directly boost cash flow upon completion. Furthermore, its 2024 acquisition of three U.S. gas utility companies for $14 billion diversifies its revenue streams and strengthens its footprint in natural gas transmission.
For investors building a long-term, stable source of passive income, both Bank of Nova Scotia and Enbridge represent compelling candidates. They offer competitive dividend yields today, backed by distinct growth narratives—one from a strategic corporate transformation and the other from disciplined capital expansion—making them worthy of consideration for a diversified TFSA portfolio.
