January is the perfect month to start thinking about Registered Retirement Savings Plan (RRSP) contributions. New Year, new you. When building a portfolio for the really long term, it’s important to hold the highest quality stocks. Preferably, these stocks should grow at a predictable rate over time. Ideally, these equities also provide stable and growing income over time.
In this article, I’m going to highlight my top two picks for RRSP investors right now.
This company’s core business provides a level of cash flow stability and safety few other TSX companies provide. As fellow Fool contributor Robin Brown noted in a recent article: “Fortis’s electric and gas transmission/distribution assets are incredibly difficult to replicate. In markets where it transports power, it holds an essential monopoly. Also its cash flow stream is 99% regulated, meaning its cash flows are incredibly stable and consistent.”
I couldn’t agree more. I think the long-life regulated unities assets Fortis owns, along with its monopoly-linked pricing power, provide a very bullish long-term ownership thesis.
From an income perspective, Fortis’ yield sits just shy of 4% at the time of writing. This may not seem so appealing at first glance for many investors. However, one must consider the historical track record of Fortis in growing its dividend over time. Fortis is among a very small group of TSX-listed companies that have raised their dividend each and every year for nearly five decades.
In my view, the rate at which companies grow their dividends over time is just as important as its yield at a given point in time. In fact, in many ways, I think dividend growth is more important for long-term RRSP investments. Those with growing income needs in retirement need to think about how they’re going to fund these needs. Fortis provides a realistic path to accomplishing such goals.
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Historically, Toronto-Dominion Bank (TSX:TD)(NYSE:TD) has outperformed the broader TSX by a wide margin. TD has consistently been one of the best growth plays in the Canadian banking space, and this performance is likely to continue long-term. TD continues to trade at a premium to its peer group, and I think this is warranted. Accordingly, this is not necessarily a “value” pick, but rather a longer-term play on capital appreciation and dividend growth over time.
Notably, this company, like Fortis, has also been a historical dividend growth gem for investors. As I pointed out in a recent piece, TD has more than doubled its dividend over the past ten years. Again, for those with long-term income needs, this is a critical attribute to consider.
TD’s growth profile supports the thesis for continued share price appreciation and further dividend increases over the long-term. This stock continues to be one of my top RRSP picks for those with income needs in their golden years.
Here are some other great long-term top picks to consider!
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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 Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool recommends FORTIS INC.