RRSP Investors: 2 TSX Dividend Stocks to Buy for Great Total Returns

Top dividend-growth stocks tend to deliver strong total returns for RRSP investors.

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Canadian savers are on the lookout for top TSX stocks to add to their self-directed RRSP portfolios. One popular RRSP investing strategy involves buying reliable dividend stocks to generate solid long-term total returns.

Fortis

Fortis (TSX:FTS)(NYSE:FTS) is holding up well in the recent market pullback. The defensive nature of the stock is appealing to investors who want to own companies with reliable and growing dividends that don’t depend on volatile revenue streams.

Fortis gets 99% of its revenue from $58 billion in regulated utility assets located across Canada, the United States, and the Caribbean. These include power generation, electric transmission, and natural gas distribution businesses. Customers need the services regardless of the state of the economy or the disruptions in global financial markets caused by geopolitical turmoil.

Fortis grows through a combination of strategic acquisitions and capital projects. The current $20 billion capital program is expected to boost the rate base by roughly $10 billion through 2026. As a result, management says cash flow should increase enough to support targeted average dividend increases of 6% per year through at least 2025.

Fortis has raised the dividend in each of the past 48 years. That’s a great track record and the steak is one reason the share price has moved steadily higher. In fact, investors who bought $10,000 worth of Fortis stock 25 years ago would have about $190,000 today with the dividends reinvested.

TD Bank

TD (TSX:TD)(NYSE:TD) raised the dividend by 13% for fiscal 2022. Investors have received a compound annual dividend-growth rate of better than 10% over the past two decades.

TD is using the large cash position it’s built over the past two years to make a big acquisition in the United States. The deal to purchase First Horizon will boost TD’s presence in the southeast part of the country, including Florida, where TD already operates. In fact, TD spent much the past 15 years buying banks from Maine right down to the sunshine state. First Horizon adds more than 400 branches to the retail network.

Once the deal closes TD will become a top-six retail bank in the United States. This gives RRSP investors good exposure to U.S. economic growth through a Canadian company.

TD’s share price is down to $92 at the time of writing compared to the 2022 high around $109. The stock looks undervalued right now and provides a 3.9% dividend yield.

Investors with a buy-and-hold style have done well with TD stock over time. A $10,000 investment in TD 25 years ago would be worth about $210,000 today with the dividends reinvested.

The bottom line on RRSP investing

Fortis and TD are top TSX dividend-growth stocks that have delivered solid total returns for investors over the past two decades. There is no guarantee future returns will be as robust, but the strategy of investing dividends in new shares is a proven one for building wealth, and these stocks still deserve to be anchor retirement holdings.

If you have some cash to put to work in a self-directed RRSP, Fortis and TD should 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 recommends FORTIS INC. Fool contributor Andrew Walker owns shares of Fortis.

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