Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP) investors are searching for top stocks to buy to build retirement wealth. One popular investing strategy involves buying leading dividend-growth stocks and using the distributions to acquire new shares. Top Canadian dividend stocks are now on sale, providing investors with good entry points for buy-and-hold retirement portfolios.
Fortis
Fortis (TSX:FTS) is one of those stocks investors can buy and simply forget for decades. The utility company has $60 billion in assets located in Canada, the United States and the Caribbean. Operations include power generation, electricity transmission, and natural gas distribution businesses. These are essential services that generate 99% of their revenue from regulated assets. Cash flow tends to be predictable and reliable as a result.
Fortis trades for less than $54 per share compared to $65 at the peak in 2022. The drop appears overdone, given the stable nature of the revenue. Investors can now pick up a 4% dividend yield. Fortis has raised the dividend in each of the past 48 years. Management is targeting annual dividend growth of about 6% through 2025, supported by the current $20 billion capital program.
Fortis has a good track record of making strategic acquisitions to complement the development projects. It wouldn’t be a surprise to see the company do another deal in the next few years, as the utility sector consolidates.
Long-term investors have done well with Fortis stock. A $10,000 investment in the shares 25 years ago would be worth about $150,000 today with the dividends reinvested.
CN Rail
CN (TSX:CNR) is Canada’s largest rail company and the only one in North America with tracks that connect ports on three coasts. The network runs form the Pacific to the Atlantic in Canada and right through the United States to the American Gulf Coast.
CN’s second-quarter 2022 record revenues demonstrated the company’s ability to pass rising costs through to customers. That is important during times of high inflation. CN generates revenue in both Canadian and U.S. dollars. When the America currency soars, as it has this year, profits normally get a nice boost when the funds are converted to the Canadian currency.
CN serves as a strategically important part of the smooth operation of the economy in both countries and revenue is expected to grow in step with economic expansion. A recession might be on the way, but demand for CN’s services remain robust. CN transports crude oil, coal, cars, forestry products, grain, fertilizer, and finished goods. When one segment has a rough quarter, the others tend to pick up the slack.
CN generates strong free cash flow to support generous dividend growth and buy back stock. The board raised the dividend by 19% for 2022. The compound annual dividend-growth rate is about 15% since the company began to trade publicly in the 1990s.
A $10,000 investment in CN stock 25 years ago would be worth about $390,000 today with the dividends reinvested. CN trades near $155 at the time of writing compared to $170 earlier this year.
The bottom line on top stocks to buy for total returns
Fortis and CN are good examples of top dividend-growth stocks that raise the payouts steadily and have delivered attractive total returns. They look cheap today and deserve to be on your radar.
The TSX is home to many great dividend-growth stocks that now appear attractive to buy for a TFSA or RRSP portfolio.
