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

These top TSX dividend stocks have delivered great total returns for RRSP investors.

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Canadian savers are searching for good TSX stocks to buy inside their self-directed RRSP that pay reliable dividends and can grow in value over time.

Fortis

Fortis (TSX:FTS)(NYSE:FTS) is a perfect example of a quality TSX dividend stock that combines steady payout growth with a rising share price to generate great returns for buy-and-hold retirement investors.

The utility company owns natural gas distribution, power generation, and electric transmission assets in Canada, the United States, and the Caribbean. A full 99% of the revenue comes from regulated businesses. This means cash flow to support the dividend tends to be predictable and reliable.

Fortis has a great track record of delivering growth through a combination of strategic acquisitions and development projects. The current $20 billion capital program will boost the rate base by more than 30% through 2026. As a result, cash flow will expand meaningfully, and Fortis is providing dividend-growth guidance of about 6% per year through 2025. Additional projects are under consideration that could result in even higher increases.

Investors should feel confident the company will deliver the payout hikes as planned. Fortis has increased the distribution in each of the past 48 years. At the time of writing, the dividend provides an annualized yield of 3.6%.

A $10,000 investment in Fortis stock 20 years ago would be worth about $103,000 today with the dividends reinvested.

Royal Bank

Royal Bank (TSX:RY)(NYSE:RY) is a giant in the Canadian financial sector and ranks among the top 10 in world based on market capitalization.

The bank has navigated the pandemic in strong shape and is sitting on a war chest of excess cash it needs to deploy. Royal Bank raised the dividend by 11% when it reported fiscal Q4 2021 earnings. Investors could see another large increase in the first half of this year. Royal Bank is also buying back stock and might use the strong cash position to make a strategic acquisition to drive growth.

The stock price is up 35% in the past 12 months, but down from recent highs. At 12.8 times trailing earnings the shares are not cheap, but you are paying for top quality when you buy Royal Bank stock. The current dividend provides an annualized yield of 3.4% at the time of writing.

The bank of Canada and the U.S. Federal reserve are expected to begin increasing interest rates in the coming months. Higher rates tend to be positive for the banks, as they can generate better net interest margins. The downside is the risk of higher loan defaults, but the net impact should be a better bottom line.

Royal Bank has been a profitable holding for long-term RRSP investors. A $10,000 investment in RY stock 20 years ago would be worth more than $115,000 today with the dividends reinvested.

The bottom line on top stocks to buy for RRSP total returns

Fortis and Royal Bank pay reliable dividends that should continue to grow. The stocks have delivered strong total returns for buy-and-hold RRSP investors and still appear attractive for a self-directed retirement portfolio.

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 FORTIS INC. Fool contributor Andrew Walker owns shares of Fortis.

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