RRSP Investors: Use Your CRA Funds and Invest in This TSX Stock

Fortis stock is an ideal TSX stock for your RRSP for its consistent, steady growth, predictability, and growing dividend income.

| More on:
edit Close-up Of A Piggybank With Eyeglasses And Calculator On Desk

Image source: Getty Images

A tax refund from the Canada Revenue Agency (CRA) is a special gift that can hopefully make it into your RRSP. It’s the reward for all of your hard work during the year and for your effort at tax time. Well, that’s the way I see it anyway. So, it makes sense to protect and preserve this money as best as you can. One way to do this is by investing it into your RRSP for tax-sheltered returns.

Fortis (TSX:FTS) is a TSX stock to buy with your CRA funds for capital preservation, income, and long-term growth.

Consistent, predictable returns to safeguard and grow your CRA funds within your RRSP

As a $26 billion utility company with a geographically diversified set of assets, Fortis is naturally defensive. The list of defensive attributes is long. But let me zero in on a couple.

Firstly, on top of being geographically diversified, Fortis also has a diversified list of assets, such as transmission assets, distribution assets as well as cleaner energy fuel assets and renewable energy assets. This diversification reduces its exposure to one specific business and smooths out earnings.

Secondly, the fact that Fortis is in the regulated gas and electric utilities industry guarantees a level of return for the company.

So, how does this dynamic play out in Fortis’s results? Well, it plays out really nicely. For example. Fortis stock has an average annual shareholder return of 11% in the last 20 years. Also, Fortis has a 49-year history of dividend increases. The latest dividend increase was a 5.6% increase this year, and the company expects dividend growth in the range of +4-6% until 2027. Thus, Fortis is a TSX stock that’s a very solid option to park your CRA funds in.

This TSX stock is in it for the long haul — like your RRSP

I’ve touched upon the fact that Fortis has some assets in the clean energy fuel and renewable energy businesses. These assets are indicative of Fortis’s intention to participate in the journey toward renewable, clean energy. In fact, Fortis is already well on its way. Since 2019, the company has reduced its emissions by 28%. And Fortis has set out its plans for the future, with targets to reduce emissions by 50% by 2030 and 75% by 2035.

In order to achieve this, Fortis has been divesting of its coal assets. In fact, Fortis has been actively removing these assets, and adding renewable assets in their place. Last year, Fortis closed the last unit of its coal-fired electric plant at the San Juan-generating station in New Mexico, removing 170 megawatts of coal-fired generation.

By 2035, Fortis’s plans are for its business to be entirely focused on energy delivery and renewable energy. As we can see, this shift is well under way today. Buying Fortis stock in your RRSP, allows you to participate in a tax-free way.

Valuation on Fortis stock is looking good

We wouldn’t want to buy Fortis stock if the valuation was not right. You see, protecting your CRA funds is of utmost importance. This includes sheltering the funds from tax within your RRSP. It also means getting into a stock at reasonable valuations. So, Fortis stock has declined 8.5% since its 2022 highs. On a three-year basis, it’s up 6.7%.

In terms of valuation, Fortis stock is trading at 20 times this year’s expected earnings and 19 times next year’s expected earnings. This is reasonable in my view, given Fortis’s strong history of shareholder returns, its stability and its predictability. Also, Fortis’s dividend yield is currently a very generous 3.82%. Invested in your RRSP, this represents a nice tax-sheltered annual return for your CRA funds.

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.

Fool contributor Karen Thomas has no position in any of the stocks mentioned. The Motley Fool recommends Fortis. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Happy family father of mother and child daughter launch a kite on nature at sunset
Dividend Stocks

Parents: Here’s How to Boost Your Monthly Income

Parents, you have enough to worry about. But if you can put aside even $40 per month, that can create…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

Looking for a Reliable Retirement Income? Consider These Dividend-Paying Stocks

Investors looking to establish a reliable retirement income have no shortage of options to choose from. Here's a trio of…

Read more »

edit Person using calculator next to charts and graphs
Dividend Stocks

3 Oversold Dividend Stocks That Could Make You Rich When They Bounce Bank

Don't wait around for these oversold dividend stocks to bounce back, each certainly will, which is why now is the…

Read more »

A small flower grows out of a concrete crack.
Dividend Stocks

Down 8% Last Month, Canadian Tire Stock Is a Deal Heading Into June 2023

May wasn't a good month for the stock, but June has been different from the beginning and may present an…

Read more »

Canadian Dollars
Dividend Stocks

Need Passive Income Right Now? Turn $20,000 Into $152 Every Month

This dividend stock may be down now, but offers substantial passive income through its 9.31% dividend yield as of writing!

Read more »

Double exposure of a businessman and stairs - Business Success Concept
Dividend Stocks

Is Exchange Income Stock a Buy?

Even within an industry, some stocks might be worth considering in certain market conditions, while others may be avoided.

Read more »

Dividend Stocks

2 Top Canadian Value Stocks in June 2023

Canadian Imperial Bank of Commerce (CIBC) stock is a compelling buy in June, and so is this Canadian REIT.

Read more »

Illustration of bull and bear
Dividend Stocks

2 Cyclical Stocks to Buy Before the Next Bull Market

The TSX index has been cyclical in the past 12 months, with neither a bearish nor a bullish trend fully…

Read more »