RRSP Investors: 2 Top Canadian Dividend Stocks to Help Build Pension Wealth

Owning top dividend stocks in your RRSP can help you retire rich.

| More on:
Dollar symbol and Canadian flag on keyboard

Image source: Getty Images

Canadian savers are starting to get their final RRSP contributions sorted out before the deadline for 2019.

The RRSP is a valuable tool for setting extra cash aside for retirement to help complement payments from employment pensions, CPP, and OAS. Contributions that are made today can be used to reduce taxable income.

This is particularly attractive for people who are currently in higher tax brackets than they might expect to be when they pull the funds.

RRSP withdrawals are subject to income tax, but many people take the money out after they stop working or shift to part-time work. This puts them in a lower tax bracket than when they made the initial contributions.

Where should you invest?

Top dividend stocks have a good track record of helping RRSP investors build wealth, especially when the distributions are invested in new shares.

Let’s take a look at two top Canadian stocks that might be interesting picks today.

TD

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is a leading player in the Canadian banking sector with strong personal banking, commercial banking, and wealth management operations.

The acquisition of Saskatchewan-based Greystone in 2018 was a strategic move to boost the wealth management business, and investors should see the benefits in the coming years. TD also has a large U.S. division that has emerged to become a significant force in the country. The American group contributed nearly 40% of TD’s total net earnings for fiscal 2019.

The bank has a strong track record of dividend growth, and the board also repurchases shares. TD has raised its dividend by a compound annual rate of about 11% over the past two decades.

Investors who buy today can pick up a 4% yield.

Long-term investors have done well with the stock. A $10,000 investment 20 years ago would be worth $80,000 today with the dividends reinvested.

Enbridge

Enbridge (TSX:ENB)(NYSE:ENB) is a giant in the North American energy infrastructure industry.

The company transports nearly 20% of all oil that is produced in Canada and the U.S. and a significant portion of the total natural gas consumed in the United States.

Enbridge also has gas utility businesses in Canada and is growing its global renewable energy division, which includes solar, wind, geothermal, and hydroelectric facilities.

The company went through a transition in the past couple of years that saw Enbridge sell roughly $8 billion in non-core assets as part of the new strategy to focus on regulated businesses.

Enbridge also streamlined its operations, bringing four subsidiaries under the umbrella of the parent company.

The changes should be positive for investors. The balance sheet has improved, and cash flow should be more predictable due to the majority of the revenue coming from regulated assets.

Enbridge raised the dividend by nearly 10% for 2020 and is anticipating growth in distributable cash flow of 5-7% per year over the medium term. That should support ongoing annual dividend increases in the same range.

The current dividend provides a yield of 6%.

A $10,000 investment in Enbridge 20 years ago would be worth $150,000 today with the dividends reinvested.

The bottom line

TD and Enbridge are market leaders with strong track records of generating solid returns for investors. If you are searching for top dividend stocks to put in your RRSP, these companies deserve to be on your radar.

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.

The Motley Fool owns shares of and recommends Enbridge. Fool contributor Andrew Walker owns shares of Enbridge.

More on Investing

A cannabis plant grows.
Cannabis Stocks

Canopy Growth Stock Is Rising But I’m Worried About This One Thing

Canopy Growth stock is soaring as the legalization effort makes real progress in both Germany and the United States.

Read more »

young woman celebrating a victory while working with mobile phone in the office
Investing

3 Roaring Stocks to Hold for the Next 20 Years

These top TSX stocks are excellent long-term buys, given their multi-year growth potential and solid underlying businesses.

Read more »

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

grow dividends
Investing

Here’s My Top 3 TSX Stocks to Buy Right Now

Even though the TSX has been rising, there are still some good bargains out there. Here are three top compounding…

Read more »

Target. Stand out from the crowd
Investing

Prediction: This Canadian Growth Stock Could Double by 2030

Alimentation Couche-Tard (TSX:ATD) is a top growth stock that could do well over the next six or so years.

Read more »

Businessman holding AI cloud
Tech Stocks

Could Investing $20,000 in Nvidia Make You a Millionaire?

Nvidia stock has made investors millionaires in the last 10 years. Is it too late to invest to become a…

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

money cash dividends
Stocks for Beginners

Have $500? 3 Absurdly Cheap Stocks Long-Term Investors Should Buy Right Now

If you're looking for cheap stocks, these three have a huge future ahead of them, all while costing far less…

Read more »