2 Quality Stocks With Yields of 4-6% for Your RRSP

Could your RRSP use another dividend stock? If so, BCE Inc. (TSX:BCE)(NYSE:BCE) and Acadian Timber Corp. (TSX:ADN) should be on your radar.

| More on:

Opening and contributing to a Registered Retirement Savings Plan (RRSP) is a great way to set money aside for retirement, and deductible contributions can help reduce your taxes.

Let’s take a closer look at BCE Inc. (TSX:BCE)(NYSE:BCE) and Acadian Timber Corp. (TSX:ADN) to see why they would make great additions to your RRSP today.

BCE Inc.

BCE is Canada’s largest communications company, including its leading provider of high-speed internet services, its leading provider of television services, and its third-largest wireless provider. As of June 30, it has approximately 20.93 million subscribers.

BCE currently pays a quarterly dividend of $0.6825 per share, representing $2.73 per share on an annualized basis, and this gives its stock a very high yield of about 4.4% at today’s levels.

Its cash flow supports its dividend. In the first half of 2016 BCE’s free cash flow totaled $1.35 billion, and its dividend payments totaled just $1.12 billion, resulting in an 82.7% payout ratio. Its payout ratio was above its target range of 65-75% in the first half of the year, but it stated that it’s on track to be within its target range by year-end.

On top of having a high and safe yield, BCE is one of the market’s best dividend-growth stocks. It has raised its annual dividend payment for seven consecutive years, and its 4% hike in February has it on pace for 2016 to mark the eighth consecutive year with an increase.

I think BCE’s consistently strong growth of free cash flow, including its projected 4-12% year-over-year increase in fiscal 2016, and its acquisition of Manitoba Telecom Services Inc., which is expected to close at the end of 2016 or early 2017 and provide immediate free cash flow accretion and significant operational synergies and tax savings, will allow its streak of annual dividend increases to continue for the foreseeable future.

Acadian Timber Corp.

Acadian is one of the leading suppliers of primary forest products in eastern Canada and the northeastern United States, including sawlogs, pulpwood, and biomass by-products. It’s also the second-largest timberland operator in New Brunswick and Maine with approximately 2.4 million acres of land under management, and it owns and operates a forest nursery in New Brunswick.

Acadian currently pays a quarterly dividend of $0.25 per share, representing $1.00 per share on an annualized basis, giving its stock a very high yield of about 5.6% today.

Like BCE, Acadian’s cash flow supports its dividend. In the first half of 2016 its free cash flow totaled $8.91 million ($0.53 per share), and its dividend payments totaled just $8.37 million ($0.50 per share), resulting in a 93.9% payout ratio, which is essentially in line with its long-term target of 95%.

Acadian is also an up-and-coming dividend-growth stock. It has raised its dividend twice since the start of 2015, and its most recent hike in October 2015 has it on pace for 2016 to mark the second consecutive year in which it has raised its annual dividend payment.

I think Acadian’s strong operational performance and the positive outlook on the industry by forecasters, including predictions that U.S. lumber and sawtimber demand will continue to grow at over 5% annually over the next few years to support domestic construction needs, will allow it to continue to grow its dividend over the next several years, making it one of the best long-term investment opportunities in the industry.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joseph Solitro has no position in any stocks mentioned. Acadian Timber is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

3 Dividend Stocks Everyone Should Own for the Long Haul

For investors looking for top-tier dividend stocks to buy and hold for the long term, here are three of my…

Read more »

Payday ringed on a calendar
Dividend Stocks

3 Dividend Stocks That Pay Me More Than $54.57 Per Month

These three dividend stocks have done me well over the years, so let's look at how much I've gotten in…

Read more »

Golden crown on a red velvet background
Dividend Stocks

Dividend Royalty: 3 Fabulous Stocks to Buy Now for Decades of Passive Income

Rogers Communications stock and Canadian Natural Resources stock could pay you dividends for decades to come.

Read more »

Dividend Stocks

The Top Canadian REITs to Buy in April 2024

For growth and dividends this April, look to these two REITs that have quite the promising present as well as…

Read more »