A Tax-Free Savings Account (TFSA) is an excellent vehicle for long-term wealth creation, allowing eligible investors to grow their investments tax-free within their available contribution room. For 2026, the annual contribution limit is $7,000, bringing the cumulative contribution limit to $109,000.
However, investors should be selective when choosing stocks for their TFSA. Selling an investment at a loss not only reduces capital but also permanently eliminates the lost amount from the TFSA’s contribution room. Therefore, investors should focus on high-quality companies with established businesses, resilient cash flows, and a strong track record of paying and growing dividends.
Against this backdrop, the following two quality dividend stocks could be excellent additions to a TFSA. An investment of $21,000 split equally between these two stocks could generate approximately $200 in quarterly dividend income, providing investors with a steady stream of tax-free passive income. Let’s take a closer look at these two stocks.
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TC Energy
TC Energy (TSX:TRP) is a diversified energy infrastructure company that operates an extensive natural gas pipeline network alongside a portfolio of power generation assets with approximately 4.7 gigawatts of capacity. With its long-term take-or-pay contracts and regulated assets, the company’s financial performance is relatively insulated from commodity price volatility and broader macroeconomic fluctuations. Supported by this resilient business model and consistent financial performance, TC Energy has delivered a total return of approximately 170% over the past decade, representing an annualized return of 10.4%. The company has also increased its dividend for 26 consecutive years and currently offers a forward yield of approximately 4.1%.
Looking ahead, demand for TC Energy’s infrastructure could continue to benefit from rising natural gas production and consumption across North America. The company is actively expanding its asset base and placed approximately $2 billion of projects into service during the first two quarters. It expects to bring a total of $3.5 billion of projects into service this year, further strengthening its earnings and cash-flow base.
TC Energy’s long-term growth outlook also remains encouraging, with approximately $20 billion of projects currently in its development pipeline. Supported by these expansions, management expects adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) to reach $12.6–13.1 billion by 2028, with the midpoint implying annualized growth of approximately 5.4%.
Given its resilient business model, reliable cash flows, long-standing dividend-growth track record, favourable industry trends, and visible growth pipeline, TC Energy could be an excellent addition to a TFSA for investors seeking a combination of dividend income and long-term growth.
Bank of Nova Scotia
My second pick is Bank of Nova Scotia (TSX:BNS), which provides a broad range of financial services across multiple countries. The bank recently reported an impressive third-quarter performance, with adjusted net income rising 18.1% year over year to $3 billion. Adjusted earnings per share (EPS) also increased 21.3% to $2.28. Strong results across its business segments, particularly Global Wealth Management and Global Banking and Markets, supported the bank’s performance. Meanwhile, adjusted return on equity (ROE) rose 180 basis points to a record 14.2%, allowing BNS to achieve its medium-term 14% target well ahead of its fiscal 2028 deadline.
Reflecting its strong financial performance and solid capital position, BNS returned approximately $6.3 billion to shareholders this year through dividends and share repurchases. Its current quarterly dividend of $1.14 per share translates into a healthy forward yield of approximately 3.5%.
Looking ahead, BNS continues to strengthen its higher-profitability North American operations while reducing its exposure to riskier and less profitable Latin American markets. This strategic repositioning could improve the quality, stability, and profitability of its earnings over the long term. Furthermore, a relatively higher interest-rate environment could support the bank’s core lending operations and net interest income, although the impact will depend on the broader interest-rate cycle.
Given its strong third-quarter results, long history of paying dividends dating back to 1833, attractive yield, and improving earnings profile, BNS could be an excellent addition to a TFSA for investors seeking reliable dividend income and long-term growth.
