RRSP Investors: 2 Top Canadian Stocks to Buy on a Dip

A market correction could be on the way and RRSP investors are looking for top stocks to add to their portfolios.

| More on:
Man considering whether to sell or buy

Image source: Getty Images.

Investors with some cash to put to work inside their RRSP are finally getting a chance to buy some top Canadian stocks at attractive or even undervalued prices.

Nutrien

Nutrien (TSX:NTR)(NYSE:NTR) is a global leader in the fertilizer industry. The company produces and sells roughly 27 million tonnes of potash, nitrogen, and phosphate every year.

The price cycle for these commodities is now on an upward trend after a multi-year slump. Current prices are above their three-year average, but still below levels needed for producers to invest in new mines and assets, putting Nutrien in a sweet spot.

In the years before the merger of Potash and Agrium that created Nutrien in early 2018, the two companies completed major capital programs that built world-class facilities that could scale up output when the market recovered. This means investors don’t have to worry about large expensive overhauls that would drain cash flow that can be paid out as dividends or used to buy back shares.

As crop nutrient prices rebound, Nutrien has the potential to be a free cash flow machine.

The stock is back down to $72 per share from a recent high of close to $79. Investors should take advantage of the pullback to add Nutrien to their RRSP portfolios.

This should be a great buy-and-hold stock to play the global growth in food demand that is expected to accompany rising populations and improved middle-class wealth in the next 30 years.

Investors should see steady dividend growth over the medium term. The current payout provides a yield of 3%.

TD

TD (TSX:TD)(NYSE:TD) is a giant in the Canadian banking industry with a market capitalization of nearly $160 billion. The bank is also one of the top 10 players in the U.S. market.

TD spent the past 15 years building its American retail business. As the U.S. economy rebounds from the pandemic TD should benefit. The bank reported fiscal Q2 2021 adjusted earnings of $3.8 billion and reversed $377 million in provisions for credit losses set aside last year.

TD is sitting on billions of extra cash. The CET1 ratio at the end of the last quarter was 14.2%, well above the 9% required by regulators. While some loan default risks still remain once government aid ends later this year, TD and its peers have avoided the worst-case scenario.

TD could use the cash pile to make another acquisition in the United States to boost growth. Investors should also see a stream of dividend increases and share buybacks once the banks get permission to deploy more cash to shareholders. TD has a compound annual dividend growth rate of at least 10% over the past two decades. Distribution hikes should match or exceed that level in the next few years.

Interest rate hikes in the United States and Canada are expected to begin in 2022 or 2023. This would potentially put pressure on some borrowers, but the net impact of higher rates tends to be positive for banks.

The bottom line on RRSP investing

Nutrien and TD are two of Canada’s top companies. They enjoy leadership positions in their industries and should deliver solid long-term gains for buy-and-hold RRSP investors. The stocks look attractive right now and should be top picks on a meaningful pullback in their share prices.

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 recommends Nutrien Ltd. Fool contributor Andrew Walker owns shares of Nutrien and TD.

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 »