RRSP Wealth: 2 Dividend-Growth Stocks to Own for 20 Years

Patient RRSP investors can potentially reap big rewards with this dividend stock strategy.

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The market correction is giving buy-and-hold investors a chance to buy some top TSX dividend stocks at cheap prices for a self-directed Registered Retirement Savings Plan (RRSP) portfolio. One popular investing strategy involves buying top Canadian dividend stocks and using the distributions to acquire new shares.

TD Bank

TD (TSX:TD) has a compound annual dividend growth rate of better than 10% over the past 25 years. The stock is currently out of favour due to the general pullback in bank stocks in the past two months and a company-specific issue connected to an acquisition.

Investors are concerned that TD might overpay for its planned purchase of First Horizon, a regional bank in the United States with operations located in the southeastern part of the country. From a strategic perspective, the deal makes sense. TD already has a network of branches running from Maine right down the east coast to Florida. Adding First Horizon would make TD a top-six bank in the American market.

The failure of a few regional banks in the United States in March and ongoing concerns about the health of the American bank sector has triggered a selloff in the shares of smaller U.S. banks. First Horizon, for example, trades near US$18 per share at the time of writing. TD’s agreed purchase price is US$25 per share.

Despite the near-term uncertainty, TD stock is probably an attractive pick today for RRSP investors. Buying the stock on major declines has historically generated decent long-term gains. A $10,000 investment in TD stock 20 years ago would be worth nearly $100,000 today with the dividends reinvested.

Canadian Natural Resources

CNRL (TSX:CNQ) is unique in the energy patch. The oil and natural gas producer has a wide range of oil production that includes oil sands, heavy conventional oil, light conventional oil, and offshore oil sites. In addition, CNRL is a major natural gas producer in western Canada with significant untapped land resources in key resource regions.

CNRL typically owns 100% of its assets rather than having partners. This increases risks, but it also enables management to quickly shift capital around the portfolio to benefit from changes in oil and natural gas prices.

This flexibility combined with a solid balance sheet has allowed CNRL to raise the dividend for 23 consecutive years with a compound annual growth rate of better than 20% over that timeframe.

CNQ stock can be volatile. The share price plunged from $40 to $11 in 2020 and has since rebounded to $80 on the back of the recovery in energy prices.

The current dividend yield is 4.5%, and investors could see another bonus distribution this year if oil prices extend their gains. Last August, CNRL paid out a special dividend of $1.50 per share.

A $10,000 investment in CNQ stock 20 years ago would be worth about $220,000 today with the dividends reinvested.

The bottom line on top dividend stocks for RRSP investors

TD and CNRL are good examples of top TSX dividend stocks that have rewarded patient investors with attractive total returns. There is no guarantee that future gains will be the same, but these stocks deserve to be on your radar, and the strategy of buying top TSX dividend stocks and using the distributions to acquire new shares is a proven one for helping investors generate long-term RRSP wealth.

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 Canadian Natural Resources. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker has no position in any stock mentioned.

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