Canadian savers are using their self-directed RRSP accounts to hold top Canadian dividend stocks.
These companies are often expensive, but the recent pullback in the TSX Index has finally served up some attractive pricing on a number of the country’s best stocks.
Let’s take a look at two names that deserve to be on your RRSP radar today.
Suncor just announced that its current CEO, Steve Williams, will step aside in 2019. When such a large company has a change at the top, investors often take a step back to see what will happen with the new leader, but that shouldn’t be the case with Suncor. The current chief operating officer Mark Little will immediately become president and take over the CEO role next spring. The transition should be smooth, as Little knows the business very well.
Suncor reported solid Q3 2018 results, supported by production growth at newly completed projects, as well as additional output that has come with acquisitions. The company is best known for its oil production facilities, but it also owns large refineries and a network of more than 1,500 Petro-Canada retail locations.
The downstream businesses have benefited from lower input costs due to the drop in Western Canadian Select prices, while the production side saw higher margins from improved WTI and Brent pricing compared to Q3 last year.
A steep drop in oil prices has hit energy stocks in recent weeks, but the market could quickly bounce back in 2019, as U.S. sanctions against Iran impact global supply.
Suncor currently trades for $44 per share compared to the 2018 high near $55. The current dividend provides a yield of 3.25%, and investors should see a nice increase in the distribution next year. Suncor raised the payout by 12.5% in 2018.
Telus has passed the peak of a major capital program, and that should translate into more cash flow available for distributions to shareholders.
The company reported Q3 adjusted 2018 net income of $445 million compared to $417 million in the same period last year. Free cash flow increased 41% to $303 million.
Telus added nearly 200,000 new wireless, TV, and internet customers in the quarter, and the strong trend should continue, supported by recent investments and the expansion of the PureFibre rollout that is connecting homes and businesses to the fibre optic network.
Dividend growth is targeted at 7-10% for 2019, which is consistent with the past several years. The current payout provides a yield of 4.7%.
Is one attractive?
Suncor and Telus should both be solid buy-and-hold picks for RRSP investors. If you can handle a bit of volatility, Suncor looks quite oversold today and likely offers better divided-growth prospects in the medium term.
If you aren’t convinced oil has a bright future, Telus might be the way to go.
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Fool contributor Andrew Walker has no position in any stock mentioned.