Even though you can move around your RRSP stocks nearly the same way you do with your TFSA stocks, the choices should be more long term in one compared to the other. The reason is that since you can’t pull your returns out of the account till you are retired, which might be decades away, you might as well go for a longer “accumulation” of capital growth or dividends and leverage the power of time as much as you can.
For that, you need consistent stocks that you can buy and hold for decades.
A high-yield dividend stock
Accumulating cash in an RRSP, while a bit different from cash in a TFSA, which you can access whenever you want, can provide an important opportunity. It can be used to buy other assets and grow your RRSP portfolio. A high-yield and undervalued stock like Slate Office REIT (TSX:SOT.UN) might be ideal for this particular usage.
The REIT is currently offering a mouth-watering yield of 7.4% and is trading at a price-to-earnings ratio of 8.3 and a price-to-book ratio of just 0.6 times. The payout ratio is healthy at 60.5%, and even though revenues took a steep dive in 2020, the REIT might be able to turn things around in 2021. With $20,000 invested in the company, you can accumulate $1,480 a year — a decent enough sum for investing.
A growth stock
Clairvest (TSX:CVG) is a Toronto-based capital market company that has been growing quite steadily for the past decade, and it is trading at a decent discount. The company has a 10-year CAGR of 18.5%, and if the company can sustain it for one or two more decades, it can be game-changing for your RRSP portfolio. The firm has helped its clients (investment) create over $2 billion of net worth over the years.
The company has made over 320 add-on acquisitions and 56 partnership investments. It has a diversified portfolio of assets to its name. The financials are a bit inconsistent, but the company has a powerfully strong balance sheet, almost no debt, and a strong cash position. It also offers dividends, but the yield is merely 0.15%.
A powerful combination
One stock that offers both decent growth and sizeable dividends is Summit Industrial Income REIT (TSX:SMU.UN). It’s currently offering a yield of 3.1% and a powerful 10-year CAGR of 34.29%. It might not be sustainable, but if the company can keep it up for just a little while longer, it can double your capital in fewer than three years.
It has a geographically diversified portfolio of light industrial properties in five provinces, though the bulk of its assets are concentrated in three (Ontario, Alberta, and Quebec). Its true growth potential comes from the “uses” its properties offer — i.e., warehousing, logistics, customer support, shipping, light assembly, etc., all of which make it an ideal e-commerce player.
It’s a good idea to add both growth and dividends to your RRSP portfolio if you want your retirement assets to be relatively well balanced. If your dividend stocks stay consistent for decades, you can turn them into income-producing streams by reinvesting the returns back to them. And your growth stocks can help you reach your retirement net worth goal sooner.