Canadian investors are always on the lookout for top dividend picks to help boost returns in their RRSPs.
Here are the reasons why Fortis Inc. (TSX:FTS) and Toronto-Dominion Bank (TSX:TD)(NYSE:TD) should be on your buy list.
Fortis
Fortis is a natural gas distribution and electricity generation firm with assets located in Canada, the United States, and the Caribbean. The company has traditionally grown through a mix of acquisitions and organic development, and that strategy continues to deliver solid results.
Fortis reported record 2015 net income of $2.11 per share, up $0.36 per share compared with 2014. The successful integration of Arizona-based UNS Energy and the start up of the company’s Waneta hydroelectric expansion in British Columbia drove much of the growth.
With UNS Energy fully integrated, Fortis is back on the acquisition trail.
The company recently announced a US$11.3 billion deal to purchase ITC Holdings Corp., the largest independent pure-play transmission company in the United States.
The stock initially sold off on the announcement as investors took a step back to digest the monster deal, but the shares have since regained the losses.
Fortis receives most of its revenue from regulated assets, which means cash flow should be predictable and reliable. That’s music to the ears of dividend investors.
The company has raised the dividend every year for more than four decades and plans to hike the distribution by 6% per year through 2020. The current payout offers a yield of 3.8%.
TD
TD is a profit machine, and that’s why long-term investors love to own the stock.
The company earned $2.2 billion in the most recent quarter on the back of strong results in both the Canadian and U.S. operations.
Most people are familiar with TD’s powerful retail presence here in Canada, but the company has invested billions over the past 10 years to build a U.S. business that actually has more branches than the Canadian operation.
The American division provides a great hedge against a weakening Canadian economy, and every dollar earned south of the border currently converts to about $1.30.
Some investors are concerned the Canadian banks are headed for tough times as a result of the bloodbath in the energy sector. Loss provisions are definitely rising at the banks, but TD has less than 1% of its total loan book exposed to oil and gas companies, so the direct risk to investors is negligible.
Like Fortis, TD has a fantastic track record of dividend growth. The company recently raised the payout by 8%, and investors should see regular increases continue.
The stock currently offers a yield of 3.95%.
