My Favourite U.S. Stocks for Canadian Investors

Canadian investors should diversify into quality U.S. growth stocks like UnitedHealth Group and others for greater returns potential.

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Hi, Canadian investors! Do you know that the Canadian dividends you receive are taxed at lower income tax rates than foreign dividends? For example, when receiving U.S. dividends in non-registered accounts, they’re ultimately taxed at your marginal tax rate, which would be a higher rate than for Canadian dividends because of the Canadian dividend tax credit for eligible dividends from Canadian corporations to Canadians.

Capital gains made from stocks in non-registered accounts are taxed the same — 50% taxed at your marginal tax rate. It would be smart to own low-yield but high-growth U.S. stocks. Therefore, my favourite U.S. stocks for Canadian investors don’t pay large dividends. Besides, history shows that as a group, dividend growers perform better than stocks that merely pay a stagnant dividend, which still perform better than non-dividend payers.

Without further ado, some of my favourite U.S. stocks that I think Canadians should explore are Raytheon Technologies (NYSE:RTX), UnitedHealth Group (NYSE:UNH), and Visa (NYSE:V), which are large-cap, growth stocks. The latter two can be bought on the NEO Exchange as Canadian Depository Receipts. They all have the ability to continue increasing their dividends.

Raytheon Technologies

The industrials company is a diversified aerospace supplier, an aircraft engine manufacturer, a provider of sensors, hardware, and communications technology for intelligence and space, and a defence prime contractor that focuses on missiles and missile defence systems. Over the past five, 10, 15, and 20 years, respectively, it increased its dividend by approximately 6.1%, 6.1%, 7.9%, and 10.6% per year. Its last dividend hike was 7.3% in April.

At US$97.96 per share at writing, Raytheon stock offers a dividend yield of 2.4%. Analysts also believe it trades at a discount of about 11%. So, it’s reasonably priced, trading at about 20 times its blended earnings with an expected earnings-per-share (EPS) growth rate of about 10.8% per year over the next three to five years.

UnitedHealth Group

The health insurer has been a fabulous long-term investment. Since 2003, it has delivered annualized returns of about 16.8%, which was roughly 90% higher than the U.S. market’s return of approximately 8.8%. For your reference, its three-, five-, and 10-year dividend growth rates are 15.6%, 17.4%, and 23.1%, respectively. It just raised its dividend by 13.9% last month.

At US$480 and change per share, UnitedHealth Group stock offers a dividend yield of only 1.6%. However, the analyst consensus 12-month price target represents a discount of almost 18%. Combined with its expected EPS growth rate of about 12.6% over the next three to five years, it’s decently attractive for total returns.

Visa

As the largest global payment processor, Visa requires little, if any, introduction. The growth stock became publicly available in 2008. Since that, it has delivered annualized returns of approximately 21% per year, which was about 93% higher than the U.S. stock market!

It has increased its dividend every year since 2008 at about 33% per year. Its three- and five-year dividend-growth rates are 14.5% and 17.8%, respectively. Its last dividend hike was 20% in October.

At US$237 and change per share, Visa stock offers a tiny dividend yield of about 0.8%. However, its expected EPS growth rate of about 14.7% per year over the next three to five years is also exceptional. Additionally, analysts believe the stock trades at a discount of 11%, which makes it reasonable for a nibble.

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 Kay Ng has positions in Raytheon Technologies, UnitedHealth Group and Visa. The Motley Fool recommends Raytheon Technologies and Visa. The Motley Fool has a disclosure policy.

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