Canadian savers are searching for top stocks to add to their RRSP portfolios.
Let’s take a look at Suncor Energy Inc. (TSX: SU)(NYSE: SU) and Toronto-Dominion Bank (TSX: TD)(NYSE: TD) to see if one is more attractive today.
Suncor
Suncor reported strong Q4 2017 results, and investors could see the good times continue through 2018 and beyond.
Why?
Management took advantage of the downturn to add strategic assets at attractive prices. The acquisition of Canadian Oil Sands gave Suncor a majority stake in the Syncrude project. Suncor also increased its ownership of the Fort Hills development.
The new assets, in combination with organic developments, such as Hebron, should drive higher production, just as oil prices appear to be in recovery mode. Fort Hills and Hebron are now scaling up output.
In addition to the oil sands assets, Suncor owns refineries and more than 1,500 Petro-Canada retail locations. These assets provide a nice hedge against pullbacks in the price of oil and are a big reason Suncor’s stock price held up so well during the rout.
Suncor isn’t widely touted as a dividend pick, but the company just raised the payout by 12.5%. Management is obviously comfortable with the revenue and cash flow outlook, and investors are being rewarded.
At the time of writing, the new distribution provides an annualized yield of 3.4%.
Toronto-Dominion Bank
TD is widely viewed as the safest bet among the big Canadian banks due to its focus on retail banking activities. In addition, TD has invested heavily to build up a strong U.S. business running right down the American east coast from Maine to Florida.
In fact, TD has more branches south of the border than it does in Canada.
The U.S. operations provided more than 30% of TD’s fiscal 2017 earnings, so investors can get nice exposure to U.S. growth through the stock.
Rising interest rates have some investors worried that Canadian homeowners will default and trigger a housing crash. It’s true that a total meltdown would be bad for the banks, but TD’s mortgage portfolio is capable of riding out a downturn, and most analysts predict a gradual pullback in the housing market.
TD has a compound annual dividend-growth rate of about 10% over the past 20 years. The current payout provides a yield of 3.4%.
Is one more attractive?
Suncor and TD are two of Canada’s top companies and deserve to be on your RRSP radar.
That said, you have to be a long-term bull on oil to own Suncor. If you fall in that camp, the company is a good way to get conservative exposure to the sector.
Otherwise, TD should continue to be a strong buy-and-hold pick for RRSP investors, and the large U.S. presence provides a nice hedge against any potential downturn in Canada.
