RRSP Investors: 2 Dividend-Growth Picks for 2017

Canadian investors are searching for top stocks to add to their RRSP holdings.

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


TD reported fiscal Q4 2016 net income of $2.3 billion, representing a 25% increase over the same period last year.

The strong results capped off an excellent year for the company and demonstrated the value of having a large U.S.-based retail business. The American operation stretches from Maine all the way down the U.S. east coast to Florida and has more branches than the Canadian retail group.

TD continues to add to its U.S. assets, including the recent purchase of Scottrade. TD Ameritrade will take the brokerage business, and TD’s U.S. banking group will get Scottrade Bank.

Overall, the U.S. group reported a 26% year-over-year increase in Q4 net income. Rising interests rates and an improving U.S. economy should support continued strength in the division.

Here in Canada, some pundits are concerned the housing market is about roll over and crush the banks. A steep drop in prices over a short time frame would certainly have an impact, but TD is positioned well to ride out a pullback.

The company finished Q4 2016 with $254 billion in outstanding Canadian housing loans. Insured mortgages represent 50% of the portfolio and the loan-to-value ratio on the other half is 58%. This means house prices would have to fall off a cliff before TD takes a material hit.

TD has a strong track record of dividend growth. The current distribution yields 3.3%.


Enbridge is in the process of buying Spectra Energy for $37 billion. The merger will create North America’s largest energy infrastructure business.

Difficult times in the oil sector and public opposition to major pipeline projects likely spurred the move, but investors are set to benefit as a result.

The two companies have a total of $26 billion in commercially secured near-term projects under development. As these assets are completed and go into service, Enbridge expects cash flow to increase enough to support annual dividend growth of at least 10% through 2024.

The current distribution offers a yield of 3.7%, so investors are already being paid well to hold the stock.

Is one more attractive?

Both companies are solid buy-and-hold picks for an RRSP account.

TD has enjoyed a huge run over the past two months, so it is probably fully valued right now. As such, I would be inclined to make Enbridge the first choice today.

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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.

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