2 Quality Dividend-Growth Stocks for Your RRSP

Looking for high-quality stocks to add to your RRSP? If so, consider dividend-growth stars such as Telus Corporation (TSX:T)(NYSE:TU) and High Liner Foods Inc. (TSX:HLF).

| 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. Dividend-growth stocks are ideal investment options for RRSPs, so let’s take a closer look at two that you could buy today.

Telus Corporation

Telus Corporation (TSX:T)(NYSE:TU) is Canada’s third-largest and fastest-growing national telecommunications company with about 12.5 million customer connections as of June 30. It provides a wide range of products and services, which include wireless, data, internet protocol (IP), voice, television, entertainment, and video, and it’s the country’s largest healthcare IT provider.

Telus currently pays a quarterly dividend of $0.46 per share, representing $1.84 per share on an annualized basis, which gives its stock a bountiful 4.3% yield today.

It’s very important to always confirm the safety of a stock’s dividend before investing, and you can do this with Telus by checking its earnings. In its 12-month period ended on June 30, its adjusted net earnings totaled $2.34 per share, and its dividend payments totaled just $1.76 per share, resulting in a sound 75.2% payout ratio.

In addition to its high and safe dividend yield, Telus has a track record of dividend growth. It has raised its annual dividend payment for 12 consecutive years, and its three hikes since the start of 2015, including its 5% hike in May 2015, its 4.8% hike in November 2015, and its 4.6% hike in May of this year, have it on pace for 2016 to mark the 13th consecutive year with an increase.

Telus also has a dividend-growth program in place to raise its dividend by 7-10% annually through 2019 by announcing hikes in May and November of each year, so investors should look for its next hike when it reports its third-quarter earnings results on November 4.

Overall, Telus has a high, safe, and growing dividend, making it one of the market’s best investment opportunities for long-term investors.

High Liner Foods Inc.

High Liner Foods Inc. (TSX:HLF) is one of North America’s largest producers and distributors of value-added frozen seafood to the food service and retail trades. Its brands include High Liner, Fisher Boy, Mirabel, Sea Cuisine, Icelandic Seafood, FPI, Viking, and American Pride.

High Liner currently pays a quarterly dividend of $0.13 per share, representing $0.52 per share on an annualized basis, and this gives its stock a yield of about 2.1% today.

It may not seem completely necessary to confirm the safety of a stock’s dividend whose yield is less than 3%, but I think investors should always do so anyways, and you can do this with High Liner by checking its cash flow. In the first half of 2016, its net operating cash flow (OCF) totaled US$47.88 million, and its dividend payments totaled just US$5.85 million, resulting in a very conservative 12.2% payout ratio.

You still may not be convinced that High Liner is a great dividend stock, so let’s get down to what really matters: dividend growth. It has raised its annual dividend payment for eight consecutive years, and its two hikes since the start of 2015, including its 14.3% hike in May 2015 and its 8.3% hike in May of this year, have it on pace for 2016 to mark the ninth consecutive year with an increase.

I think High Liners’s strong OCF growth, including its 76.5% year-over-year increase to US$47.88 million in the first half of 2016, will allow its streak of annual dividend increases to continue in 2017 and beyond.

All in all, High Liner has a modest dividend yield, a track record of dividend growth, and the ability to continue growing its dividend going forward, making it one of the best dividend-growth plays in the food industry today.

Is one a better bet than the other?

I think both Telus and High Liner represent great long-term investment opportunities today, but if I had to choose just one, I’d go with Telus because it has a much higher dividend yield and a dividend-growth program in place.

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.

More on Dividend Stocks

young woman celebrating a victory while working with mobile phone in the office
Dividend Stocks

3 CRA Benefits Most Canadians Can Grab in 2024

You can save on taxes by claiming the dividend tax credit on Fortis Inc (TSX:FTS) shares.

Read more »

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

edit Woman in skates works on laptop
Dividend Stocks

3 No-Brainer Stocks to Buy Under $30

These three stocks all offer a huge deal for investors looking for dividends, as well as growth that will last.

Read more »

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 »