The Best Dividend Stocks for Your TFSA in February 2025

Key takeaways

Reliable Dividend Growth is Key – Stocks like Fortis, CNQ, and CNR have a strong track record of increasing dividends, making them great choices for income-focused investors.

Sector Diversification Reduces Risk – Utilities, energy, and transportation each respond differently to economic cycles, so holding a mix of dividend stocks can provide stability.

Cash Flow Strength Drives Payouts – Companies with steady cash flow, like regulated utilities and essential infrastructure, are best positioned to sustain and grow dividends over time.

3 stocks I like better than the ones on this list.

For many beginner investors, their strategy within their Tax-Free Savings Account (TFSA) is to purchase high-risk, high-reward stocks to create significant five or 10-bagger returns over the short term and collect the profits tax-free.

They tend to do this with a TFSA over their RRSPs (Registered Retirement Savings Plan) primarily because, with an RRSP, any withdrawals are subject to taxes.

However, this is the wrong way to go about it. In the long term, the TFSA is an investment account best used to build a portfolio of strong Canadian companies or exchange-traded funds (ETFs) capable of growing via capital appreciation and paying their investors dividends.

Why you shouldn’t chase high returns in your TFSA

Chasing high-risk stocks can lead to Canadians permanently losing TFSA room. If you’re actively trading, it can also put you in the Canada Revenue Agency’s (CRA) crosshairs. If you invest your $6500 in a TFSA contribution room in a high-risk stock and it goes to $0, you don’t get that contribution room back.

I’ve known investors who have lost over $30,000 in TFSA rooms chasing high-risk micro-cap companies. And if you manage to make money but are deemed actively trading by the CRA, you may be hit with a tax penalty.

Even with the TFSA annual contribution growing to $7,000 in 2025, it still takes too much time to get that precious contribution room back.

I know this sounds extreme, but it’s true: missing out on long-term market average returns in your TFSA can change your life.

Another poor choice is high-fee mutual funds. Yes, funds offer much of the same diversification benefits as ETFs, and they can outperform their underlying index, but ultimately, most end up underperforming because of those fees.

What about fixed income?

Many investors chose fixed-income instruments for their TFSA contribution room in 2023, buoyed by higher interest rates being offered for high-interest savings accounts (HISAs) or guaranteed investment certificates (GICs).

These TFSA savings accounts don’t offer any capital appreciation potential, but they also won’t fall if markets are weak either.

Typically, the best rates for GICs or HISAs are found with online banks, such as Tangerine, EQ Bank, or others. You’ll find much lower rates at Canada’s largest banks, many of which only offer a small amount of interest for their regular savings accounts.

They aren’t necessarily poor investments, especially when your time horizon is shorter. However, over the long run, you want to reap the benefits of one of the highest returning assets possible, that being equities.

So, let’s look at some of the best dividend stocks for your TFSA right now.

A Leading Canadian Utility

Fortis (TSX:FTS)

Fortis is one of Canada’s largest regulated utility companies, providing electricity and natural gas to millions of customers across North America. It operates a diversified portfolio of utilities, with the majority of its earnings coming from stable, government-regulated operations. Fortis is best known for its steady, recession-resistant business model, making it a reliable choice for dividend investors.

P/E: 17.9

5 Yr Revenue Growth: 5.7%

5 Yr Earnings Growth: 2.8%

5 Yr Dividend Growth: 4.9%

Yield: 4.1%

  • Unmatched Dividend Growth Streak – Fortis has increased its dividend for nearly 50 consecutive years, making it one of the best dividend-growth stocks in Canada.
  • Highly Regulated Revenue Base – Over 99% of its earnings come from regulated utilities, providing stability and predictable cash flows.
  • Expanding Renewable Energy Investments – Fortis is actively investing in cleaner energy and grid modernization, positioning itself for future growth.
  • Strong U.S. Exposure – The company generates nearly two-thirds of its revenue from the U.S., reducing reliance on Canada’s economy.
  • Low-Risk Business Model – As a utility, Fortis enjoys strong customer demand regardless of economic conditions.
  • Management’s Commitment to Dividend Growth – Fortis has a clear roadmap to continue growing its dividend by 4-6% annually through 2028.
  • Regulatory Changes – Any shifts in government regulations could impact Fortis’ ability to increase rates.
  • Energy Transition – Fortis is investing in clean energy, and the pace of adoption will influence its future growth.
  • Interest Rate Sensitivity – As a capital-intensive business, higher rates could impact borrowing costs and future expansion plans.
  • Infrastructure Spending – Large capital projects will drive long-term growth, but investors should monitor cost overruns.
  • Rising Interest Rates – Higher borrowing costs could reduce profitability and impact future dividend growth.
  • Regulatory Uncertainty – Government decisions on electricity pricing and environmental rules could affect earnings.
  • Political Risks – Changes in government policies, especially in the U.S., could influence its operations.
  • Slower Growth Potential – While Fortis is stable, it may not offer the same capital appreciation as other sectors.

A Dividend Powerhouse in Oil & Gas

Canadian Natural Resources (TSX:CNQ)

Canadian Natural Resources (CNQ) is one of Canada’s largest oil and gas producers, known for its vast reserves and strong operational efficiency. It has a unique mix of oil sands, conventional oil, and natural gas assets, giving it flexibility in different pricing environments. CNQ has consistently rewarded shareholders with dividends and share buybacks, making it a top pick in the energy sector.

P/E: 12.5

5 Yr Revenue Growth: 12.9%

5 Yr Earnings Growth: 28.6%

5 Yr Dividend Growth: 22.5%

Yield: 4.8%

  • Elite Dividend Growth – CNQ has increased its dividend for over 20 consecutive years, a rarity in the energy sector.
  • Low-Cost Producer – CNQ’s ability to extract oil at a low cost allows it to remain profitable even in downturns.
  • Massive Free Cash Flow – With high oil prices, CNQ generates significant free cash flow, supporting dividend growth.
  • Debt Reduction Focus – The company has aggressively paid down debt, making it financially stronger.
  • Shareholder-Friendly Management – CNQ regularly buys back shares, further rewarding investors.
  • Diversified Asset Base – A mix of oil sands, natural gas, and conventional oil helps reduce risk and improve flexibility.
  • Oil Price Volatility – CNQ’s earnings are heavily tied to global oil prices, making it a key factor to monitor.
  • Energy Transition & ESG Pressures – Governments and investors are pushing for lower carbon emissions, which could impact long-term strategy.
  • Capital Allocation Strategy – CNQ must balance dividends, debt reduction, and reinvestment to sustain growth.
  • Potential Production Declines – Maintaining or increasing production while managing costs is crucial for future profitability.
  • Commodity Price Swings – A drop in oil and gas prices could hurt earnings and dividend growth.
  • Environmental Regulations – Stricter government policies on emissions could lead to higher costs and lower profitability.
  • Capital-Intensive Business – The company needs continuous reinvestment, which can be costly.
  • Political Risks – Government actions on pipelines, carbon taxes, or drilling regulations could impact operations.

North America’s Premier Rail Operator

Canadian National Railway (TSX:CNR)

Canadian National Railway (CNR) is one of North America’s largest railway operators, transporting goods across Canada and into the U.S. It is a crucial part of the economy, moving everything from grain and oil to consumer goods. CNR’s wide network, pricing power, and efficiency make it a long-term dividend-growth stock.

P/E: 21.7

5 Yr Revenue Growth: 2.7%

5 Yr Earnings Growth: 3.8%

5 Yr Dividend Growth: 9.5%

Yield: 2.2%

  • Consistent Dividend Growth – CNR has a strong history of dividend increases, backed by steady cash flow.
  • Essential to the Economy – Rail transport is a critical part of supply chains, giving CNR a defensive edge.
  • Strong Pricing Power – With limited competition, CNR can raise prices without losing business.
  • Efficient Cost Structure – CNR has improved its operations over the years, boosting profitability.
  • U.S. Market Exposure – A significant portion of its revenue comes from cross-border trade.
  • Massive Infrastructure Advantage – Owning an extensive railway network creates a strong competitive moat.
  • Supply Chain Disruptions – Any logistical bottlenecks or labor strikes could impact revenue.
  • E-Commerce Growth – More goods moving by rail due to online shopping could be a long-term tailwind.
  • Fuel & Efficiency Upgrades – CNR is investing in more efficient locomotives to cut costs and emissions.
  • Regulatory Oversight – Government policies on safety, emissions, and pricing could affect operations.
  • Economic Slowdowns – A recession or lower trade volumes could reduce demand for rail transport.
  • Labor Disputes – Strikes or contract disputes could disrupt operations and impact profitability.
  • Fuel Price Fluctuations – Rising diesel costs could squeeze margins if not offset by pricing adjustments.
  • Infrastructure Costs – Maintaining and expanding the rail network requires ongoing capital investments.

Overall, these three are solid options to start your research

In this article, I highlighted three Canadian dividend stocks that generate strong cash flow, offer high dividend yields, and have safe dividend payouts as a percentage of their cash flows. These boring blue-chip stocks are excellent choices for your TFSA deposits.

These may not be the flashiest stocks on the TSX. However, it’s essential to understand that most of the time, strong cash flow generation beats flash. Especially when we are talking about precious contribution room.

A maxed out TFSA compounding at market average returns (8-10% annually) over 30 years will make you a millionaire on that account alone by the time you retire. Don’t screw it up by chasing speculative high risk investments all for the sake of tax-free riches.