Should Suncor Inc. (TSX:SU) or Nutrien Ltd. (TSX: NTR) Stock be in Your RRSP?

Suncor (TSX:SU) (NYSE:SU) and Nutrien (TSX:NTR) (NYSE:NTR) have pulled back from their 2018 highs. Is one a buy for your RRSP right now?

| More on:
Man considering whether to sell or buy

Image source: Getty Images.

Canadian savers are constantly searching for reliable stocks to add to their RRSP portfolios.

For much of 2018, the market appeared expensive, but the recent correction is finally giving buy-and-hold investors an opportunity to pick up some top names on the TSX Index at attractive prices.

Let’s take a look at Suncor (TSX:SU) (NYSE:SU) and Nutrien (TSX:NTR) (NYSE:NTR) to see if one deserves to be on your buy list.

Suncor

A quick look at the business news headlines these days could easily deter investors from putting money into the Canadian energy sector.

Pipeline bottlenecks in Canada have driven down the price of Western Canadian Select (WCS) oil to the point where the differential between WCS and West Texas Intermediate (WTI) is about US$40 per barrel. At the time of writing, a barrel of WCS oil sells for just US$11.50 per barrel. In May it was US$58.

Many Canadian producers are hurting as a result, but a few are actually able to benefit in this environment, and Suncor is one of those names. The company owns large refineries that can generate significant margins when WCS falls, as it can acquire the crude at low prices and then sell the refined products based on WTI or Brent pricing.

In addition, Suncor has adequate pipeline access and oil-by-rail agreements to get the majority of its production to the U.S. Gulf Coast, where it is able to obtain better prices for its oil.

Suncor reported strong Q3 2018 funds from operations and is generating significant profits. The company recently increased its share buyback program and investors should see a hefty dividend increase in 2019. Suncor raised the payout by 12.5% this year.

The stock is down from $55 per share in the summer to below $44, putting the dividend yield at 3.3%.

Nutrien

Nutrien is a global leader in the production of crop nutrients. The firm was created through a merger of Potash Corp. and Agrium that concluded at the beginning of 2018.

Fertilizer prices are recovering after a multi-year slump, so the timing of the marriage appears ideal. Nutrien upgraded its guidance for 2018 due to better-than-anticipated cost savings achieved through the integration of the two companies, as well as improved market conditions for potash, nitrogen, and phosphate.

New supply contracts negotiated with China and India are at higher prices than last year. These deals are used as benchmarks for the market and should indicate that things are moving in the right direction. Due to its size, and the fact that Agrium and Potash completed major capital programs before the merger, Nutrien stands to generate significant free cash flow as fertilizer prices continue to recover.

As a result, strong dividend growth should be on the way in the coming years. The current payout provides a yield of 3.3%.

Nutrien trades for $68 per share, compared to the 2018 high of $78.

Is one a better RRSP bet?

Suncor and Nutrien should both be solid buy-and-hold picks for a self-directed RRSP portfolio. At this point, I would probably split a new investment between the two stocks.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Walker owns shares of Nutrien. Nutrien is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

money cash dividends
Dividend Stocks

Top 3 Dividend Stocks in Canada for 2022

Canada is home to some of the best dividend stocks in the world. With finance, telecoms, and energy dominating the …

Read more »

calculate and analyze stock
Dividend Stocks

2 Top TSX Stocks to Put on Your TFSA Buy List

TFSA investors are searching for undervalued TSX stocks to buy that have the potential to deliver big gains in 2022. …

Read more »

Payday ringed on a calendar
Dividend Stocks

Get Unbelievable Monthly Income With High-Yield Dividend Stocks

The only thing better than a dividend stock is a stock that pays dividends every month. For people who live …

Read more »

gas station, convenience store, gas pumps
Dividend Stocks

1 Key Catalyst Investors in Couche-Tard Stock Need to Watch

One of the top value stocks on the TSX, Alimentation Couche-Tard (TSX:ATD) has been a strong performer over the past year. …

Read more »

Value for money
Dividend Stocks

2 Top Value Stocks I’m Looking to Buy Right Now

Value investing is a lot more than just grabbing stocks that look inexpensive. The shares of an organization in permanent …

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

RRSP Investors: 2 Top Canadian Dividend Stocks to Buy for Total Returns

Canadian savers are searching for good TSX stocks to buy inside their self-directed RRSP that pay reliable dividends and can …

Read more »

Cogs turning against each other
Dividend Stocks

2 Dividend Stocks That Could Stabilize Your TFSA During a Market Correction

A common strategy for investing during a market downturn is to allocate a greater proportion of your portfolio towards dividend …

Read more »

Close up shot of senior couple holding hand. Loving couple sitting together and holding hands. Focus on hands.
Dividend Stocks

3 Top Passive-Income Stocks for Canadian Pensioners

Canadian retirees are searching for quality dividend stocks to buy insider their TFSA to generate reliable and growing passive income. …

Read more »