2 Top Dividend-Growth Stocks to Consider for Your RRSP

Here’s why Enbridge Inc. (TSX:ENB)(NYSE:ENB) and Toronto-Dominion Bank (TSX:TD)(NYSE:TD) look attractive.

| More on:

Canadians are buying dividend stocks inside their RRSPs in an effort to set aside enough cash to retire comfortably.

Let’s take a look at Enbridge Inc. (TSX:ENB)(NYSE:ENB) and Toronto-Dominion Bank (TSX:TD)(NYSE:TD) to see why they might be attractive picks.


Enbridge recently announced plans to buy Spectra Energy for $37 billion. The deal will create North America’s largest energy infrastructure company with an enterprise value of $165 billion.

As the oil rout reduces demand for new infrastructure, and public opposition mounts against the building of major new pipelines, consolidation in the sector is likely to continue. Given its large size and access to funds, Enbridge is positioned well to capitalize on opportunities.

Organic growth is still important, and Enbridge has $16 billion in near-term projects under development. Spectra will add another $10 billion to the portfolio, so the company should have enough work to keep it busy for a few years while the energy sector navigates through the current challenges.

In fact, Enbridge is comfortable enough with its cash flow–growth outlook that it plans to raise the dividend by 15% in 2017 and by at least 10% per year through 2024.

The current distribution offers a yield of 3.8%.


Some investors are concerned the oil rout and an overheated housing market could hit the Canadian banks.

TD’s direct exposure to oil and gas companies represents less than 1% of its total loan portfolio, so there is little to worry about on that front.

Regarding housing, the company has a large Canadian residential mortgage business, but 53% of the loans are insured and the loan-to-value ratio on the rest is 58%. This means house prices would have to pull back significantly before TD begins to take a meaningful hit.

TD’s revenue comes primarily from its retail banking operations in Canada and the United States. This segment tends to be more stable than capital markets activities, which account for as much as 25% of revenue at TD’s peers.

The company continues to expand its operations in the United States, which should provide a nice revenue hedge when times get tough in Canada.

TD’s compound annual dividend growth rate over the past two decades is an impressive 12%, and investors should see the distribution continue to rise in step with expected earnings growth of 7-10% over the medium term.

The current payout yields 3.6%.

Is one a better bet?

Both stocks are attractive long-term RRSP picks. Enbridge probably offers better dividend growth over the medium term, so I would probably make the pipeline operator my first choice today.

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 Andrew Walker has no position in any stocks mentioned. The Motley Fool owns shares of Spectra Energy. Spectra Energy is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

Money growing in soil , Business success concept.
Dividend Stocks

3 TSX Stocks That Could Make You a Millionaire

These three TSX stocks each have outstanding potential while trading undervalued today, creating significant opportunities for investors.

Read more »

Retirees sip their morning coffee outside.
Dividend Stocks

TFSA Investors: 3 Dividend Stocks You Haven’t Bought Yet, But Should

I get it, these dividend stocks aren't doing so hot these days. But investors should buy now and think long…

Read more »

telehealth stocks
Dividend Stocks

Retirees: 2 Dividend Stocks (With +6% Yields) for Worry-Free Passive Income

These TSX stocks offer attractive yields and have solid dividend payment histories, implying retirees can easily rely on them.

Read more »

Target. Stand out from the crowd
Dividend Stocks

2 Canadian Dividend Stocks to Buy Amid a Market Correction for Years of Passive Income

Here are two of the best Canadian dividend stocks long-term investors can buy right now to earn stable passive income…

Read more »

Caution, careful
Dividend Stocks

Top Investor-Favourite TSX Stocks to Avoid This Year

Here are two TSX stocks that could continue to underperform.

Read more »

Businessperson's Hand Putting Coin In Piggybank
Dividend Stocks

New Investors: How to Safely Make $150 in Monthly Passive Income

In this current market environment, we’re all craving safety and security. New investors looking for stable and growing passive income…

Read more »

A golden egg in a nest
Dividend Stocks

3 Stocks to Turn Five-Digit Savings Into a Six-Digit Nest Egg

If you have enough time, you can achieve decent growth goals with safe and modest growth stocks in your portfolio.

Read more »

Retirement plan
Dividend Stocks

RRSP Investors: 2 Top Oversold TSX Stocks to Buy Now and Own to Retirement

RRSP investors can now buy top TSX dividend stocks at discounted prices.

Read more »