3 Safe Stocks for Your RRSP

Investors who prefer safety over adventure should consider these names.

| More on:

With the RRSP deadline drawing closer, investors across Canada are looking for safe investment options that can be counted on over the long term. After all, the most ideal RRSP investments are the ones that can be forgotten about until retirement.

The problem is that the TSX, with its focus on financials, energy and materials, tends to have very cyclical names. But there are exceptions, and three in particular are worth highlighting.

Enbridge: Critical infrastructure and stable income

Very few companies in Canada have a smoother earnings profile than pipeline and utility operator Enbridge Inc (TSX:ENB)(NYSE:ENB). Energy producers need the company’s pipelines to move their product to market, allowing Enbridge to generate reliable, recurring income. And with oil sands output set to double to 4.5 million barrels per day by 2025, Enbridge’s critical infrastructure should be in high demand for years to come.

The company has a long history of growing dividends, and hasn’t missed a payment for 60 years. The stock currently yields 3%, but if the company’s track record is any indication, the dividend has plenty of room to grow. Of course that dividend income does not get taxed inside an RRSP.

Metro: A well-run company in a stable industry

Even during the recession, Canadians still had to eat. And of all the food retailers in Canada, Metro Inc (TSX:MRU) stands out for its consistent track record. The company has posted a return on equity of at least 14% every year for the past 20 years. Over this same time period, Metro has increased its dividend every single year.

The Canadian grocery business is one of the safest in all of retailing. Established players with long histories tend to have the best locations, while newer rivals have trouble getting good real estate. Wal-Mart has a much smaller footprint in Canada than in the U.S., and is thus less of a factor. And selling groceries online has always been more of a struggle than a threat.

CN Rail: The widest moat

Successful investors are always talking about the importance of a sustainable competitive advantage, also referred to as a “moat”. Without a moat, a company’s profits are always at risk from competitive threats, both new and existing.

Railroad transport arguably has the widest moat of any industry. The cost of laying track down is cost-prohibitive, and trucking is far too expensive for long-haul routes. One railroader has consistently outperformed its peers in recent years: Canadian National Railway (TSX:CNR)(NYSE:CNI). CN is not only the most efficient railroader in North America, but also the only one with a track network that reaches all three coasts (west coast, east coast, and gulf coast), a significant advantage over the other railroads.

Foolish bottom line

It is unfortunate that so many of Canada’s largest companies are so prone to wild fluctuations, especially since RRSP holdings ideally are supposed to make it easy to sleep at night. At least the three names above certainly pass that test.

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.

More on Investing

Business man on stock market financial trade indicator background.
Tech Stocks

This Growth Stock Is Down 26%: Buy, Sell, or Hold?

While many growth stocks took to the sky after the December 2023 earnings, this one growth stock fell 26%. Should…

Read more »

Man data analyze
Dividend Stocks

1 Magnificent S&P 500 Dividend Stock Down 39% to Buy and Hold Forever

NextEra Energy is among the largest utility companies in the world, which has delivered inflation-beating returns in the last 20…

Read more »

stock research, analyze data
Dividend Stocks

2 Magnificent Stocks to Buy That Are Near 52-Week Lows

Do you want to add some magnificent stocks to your portfolio? Here are two discounted options that you will regret…

Read more »

Dividend Stocks

Don’t Miss This Once-in-a-Decade Chance to Lock in a 9% Dividend Yield

Is your passive income portfolio earning a decent dividend yield? Here is an opportunity to boost your portfolio with a…

Read more »

four people hold happy emoji masks
Metals and Mining Stocks

Got $200? 2 Lithium Stocks to Buy and Hold Forever

Lithium stocks may not be in the headlines like chip stocks, but they have just as much growth potential over…

Read more »

Dividend Stocks

If You Invested $10,000 in BCE Stock in 2010, This Is How Much You Would Have Today

There are many ways to earn money from the same stock. Here are three ways to invest $10,000 in BCE…

Read more »

Senior Couple Walking With Pet Bulldog In Countryside

3 TSX Stocks That Could Help Make You Rich by Retirement

TSX stocks like goeasy have the potential to outperform the broader equity markets by a wide margin and deliver solid…

Read more »

Happy family father of mother and child daughter launch a kite on nature at sunset
Dividend Stocks

3 Things You Need to Know if You Buy Gildan Stock Today

Gildan stock (TSX:GIL) rose after a dividend increase, but there is still a lot of turmoil behind the scenes that…

Read more »