Launched in 2009, the Tax-Free Savings Account (TFSA) has gained popularity among Canadians over the past decade. Any returns generated in a TFSA from qualified investments are exempt from Canada Revenue Agency taxes. This makes the registered account an ideal one for buying and holding quality dividend stocks.
Generally, the best dividend stocks offer investors an opportunity to benefit from steady passive income and long-term capital gains, both of which are tax-free in a TFSA.
Here’s how these two TSX dividend stocks can transform your TFSA into a cash-generating machine in 2026 and beyond.
Is this TSX dividend stock a good buy?
Valued at a market cap of $1.1 billion, Enghouse Systems (TSX:ENGH) develops software solutions.
- Its Interactive Management Group provides contact centre and customer interaction management tools across multiple channels.
- The Asset Management Group offers operations support systems, video streaming, fleet management, and emergency dispatch solutions for the telecommunications, transit, utilities, and public safety sectors.
The TSX stock is down 75% from all-time highs and has underperformed the broader markets in recent years. However, the ongoing drawdown allows you to buy the dip and benefit from an attractive forward yield of almost 6%.
Analysts tracking the tech stock forecast revenue to increase from $500 million in fiscal 2025 (ended in October) to $551 million in fiscal 2027. In this period, free cash flow is forecast to expand from $104.5 million to $141 million.
Given Enghouse will pay shareholders an annual dividend of $1.08 per share in fiscal 2025, its dividend expense will total roughly $59 million, indicating a payout ratio of less than 60%.
The annual dividend payout is estimated to increase to $1.40 per share, raising the dividend expense to $77 million and indicating a payout ratio of 54.6%.
If ENGH stock is priced at 10 times forward FCF, it could gain 30% within the next 12 months. If we adjust for dividends, cumulative returns could be closer to 36%.
Is this blue-chip stock undervalued?
Valued at a market cap of $28 billion, Telus (TSX:T) stock is down almost 50% from its all-time high. However, it now offers a forward yield of over 9%.
While Telus operates in a mature sector, it added 288,000 total mobile and fixed customers in Q3 2025. The Canadian telecom giant now serves 21 million customer connections, up 5% year over year. It also maintained an industry-best postpaid mobile phone churn rate of 0.91%, the 12th consecutive year below the 1% threshold.
In the wireline business, Telus posted 40,000 internet net additions, continuing its remarkable 15-year streak of positive wireline growth every year since the third quarter of 2010.
Telus Health grew revenue by 18% and adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) by 24% in Q3. The Canadian telecom heavyweight also completed the acquisition of Telus Digital in October, which should generate annualized synergies of over $150 million.
Telus launched Canada’s first sovereign AI factory in September and became the first North American service provider to become an official NVIDIA cloud partner. Telus expects its AI-enabling capabilities to grow from approximately $800 million in revenue in 2025 to around $2 billion by 2028, representing annualized growth of more than 30%.
Telus increased its quarterly dividend by 4% to $0.4184 per share while maintaining its deleveraging targets. The company remains on track to achieve its leverage target of three times by 2027, which should improve balance sheet flexibility and support future dividend hikes.
Analysts tracking Telus stock forecast its annual dividend to increase from $1.66 per share in 2025 to $2.18 per share in 2029.
The Foolish takeaway
Investing a total of $15,000 equally distributed between the two tech stocks should help you earn $1,100 in annual dividends. This payout could increase to $$1,470 in 2029, which enhances the yield at cost to 9.8% from 7.3%.
