Canadians are searching for top names to add to their self-directed RRSP portfolios.
TD continues to deliver strong results, despite facing some economic headwinds in the Canadian market.
What’s the secret?
The company’s success can be linked to its retail banking strength with impressive franchises in both Canada and the United States.
The U.S. operations have grown significantly over the past decade, and TD is now known as a top-10 bank in the United States. The pace of acquisitions has slowed, but TD is still finding tuck-in opportunities.
For example, the company is in the process of buying U.S. broker Scottrade. TD’s U.S. banking operation will take the banking side of the business, while the company’s TD Ameritrade partnership will get the brokerage operations. The deal is expected to close later this year.
Some pundits are worried a real estate meltdown in Canada could hammer the domestic banks. While TD’s Canadian residential mortgage exposure is large, the portfolio is more than capable of riding out a housing downturn.
The stock has rallied 34% in the past 12 months, so investors are probably paying fair value right now, but waiting to catch this one on a dip risks giving up important distributions and potential further upside.
TD currently offers a safe 3.2% yield.
TransCanada has also made some significant investments in the United States.
The company spent $13 billion in 2016 to buy Columbia Pipeline Group in a deal that added significant natural gas infrastructure, including important assets in the growing Marcellus and Utica shale plays.
Followers of the stock believe the move was partly driven by challenges the company has faced on its mega projects, including Keystone XL and Energy East. That might be the case considering President Obama rejected Keystone XL in 2015, and many people thought Energy East was dead in the water after the Liberals won the Canadian election.
Today, the situation is quite different.
President Trump just revived the Keystone project, and Energy East is still working its way through the negotiation process with various stakeholders. Ottawa appears keen to help Alberta move its oil to the coast, so the massive pipeline could eventually see the light of day.
TransCanada has enough short-term projects on the go to keep it busy, and it plans to raise the dividend by at least 7% through 2019. The current payout offers a yield of 3.6%.
This stock is also up more than 30% in the past year.
Is one more attractive for your RRSP?
Both companies are market leaders with strong exposure to U.S. economic growth and deserve to be in any buy-and-hold portfolio.
TransCanada’s annual dividend growth might outpace TD’s in the near term, but the pipeline operator also carries higher risk in the event that interest rates start to rise faster than expected.
At this point, I would call it a coin toss between the two names.
Renowned Canadian investor Iain Butler just named 10 stocks for Canadians to buy TODAY. So if you’re tired of reading about other people getting rich in the stock market, this might be a good day for you. Because Motley Fool Canada is offering a full 65% off the list price of their top stock-picking service, plus a complete membership fee back guarantee on what you pay for the service. Simply click here to discover how you can take advantage of this.
Fool contributor Andrew Walker has no position in any stocks mentioned.