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Dividend Investors: 3 Top Canadian Stocks to Own for the Next 20 Years

Dividend stocks are popular picks for investors who want to build a TFSA or RRSP retirement portfolio. They are also useful for income seekers.

Let’s take a look at Fortis (TSX:FTS)(NYSE:FTS), Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and Canadian National Railway (TSX:CNR)(NYSE:CNI) to see why they might be interesting picks.

Fortis

Fortis owns natural gas distribution, electric transmission, and power generation businesses, primarily located in the United States and Canada.

Most of the investment in recent years has focused on U.S.-based acquisitions, including the purchase of UNS Energy in Arizona and Michigan-based ITC Holdings. Fortis spent more than US$16 billion on the two companies and now boasts a total asset base of more than $50 billion.

The company continues to grow through an aggressive capital plan that will see it invest $15.1 billion through 2022. As a result, the rate base is expected to increase significantly, and Fortis is targeting annual dividend growth of at least 6% over the medium term.

The current payout provides a yield of 4%.

A $10,000 investment in Fortis 20 years ago would be worth more than $90,000 today with the dividends reinvested.

TD

TD is a favourite pick among dividend investors. The company has increased the payout by a compound annual growth rate of more than 10% over the past two decades and raised the dividend by nearly 12% earlier this year.

The U.S. operations are driving a significant chunk of the earnings growth, supported by a robust economy, rising interest rates, and the recent tax cuts. A strong U.S. dollar compared to its Canadian counterpart also provides a nice boost to the bottom line when the profits are converted.

TD is forecasting annual earnings-per-share growth of 7-10% over the medium term. The company tends to deliver results that beat the outlook, so investors should feel comfortable with the guidance.

TD’s current dividend provides a yield of 3.4%.

A $10,000 investment in TD 20 years ago would be worth more than $140,000 today with the dividends reinvested.

CN

CN might be the best buy-and-hold stock in the Canadian market. The company enjoys a wide moat with its operations and essentially operates as the backbone of the Canadian and U.S. economies, transporting everything from coal, cars, and grain to consumer goods, crude oil, and forestry products.

Pipeline constraints are not going away anytime soon, so CN’s oil transport business should continue to grow. Like Fortis and TD, CN also gets a significant part of its revenue from U.S. operations, providing a nice hedge against any trouble in the Canadian economy.

CN has a compound annual dividend-growth rate of better than 15% and generates carloads of free cash flow. An investor who had the foresight to buy $10,000 of CN stock 20 years ago would be sitting on roughly $275,000 today with the dividends reinvested.

The bottom line

Fortis, TD, and CN are all market leaders with strong businesses that should continue to grow for decades. If you are looking for three stocks to start a buy-and-hold dividend fund, these companies deserve to be on your radar.

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David Gardner owns shares of Canadian National Railway. The Motley Fool owns shares of Canadian National Railway. Fool contributor Andrew Walker has no position in any stock mentioned. Canadian National Railway is a recommendation of Stock Advisor Canada.

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