If you’re a Canadian investor looking to put your money to work over the long term, especially within a Registered Retirement Savings Plan (RRSP), the American stock market offers a great opportunity for diversification.
Investing in U.S. stocks through an RRSP comes with a notable tax advantage: unlike in a Tax-Free Savings Account (TFSA), dividends from U.S. stocks in an RRSP are not subject to the usual 15% foreign withholding tax.
Here’s a look at two consumer stocks that I personally plan to buy and hold in my RRSP forever. None of these stocks are “cheap” or undervalued right now, but you’re paying for top quality.
Coca-Cola
Warren Buffett has famously held shares of The Coca-Cola Company (NYSE: KO) for many years, and I plan to follow in his footsteps.
One of the key strengths of Coca-Cola is its exceptional brand recognition and extensive market penetration. The company offers a variety of popular beverages including Coca-Cola, Fanta, and Sprite among others, ensuring a broad appeal across different consumer preferences.
Coca-Cola’s business model is another cornerstone of its success. The company primarily focuses on producing syrup concentrate, which is then sold to bottling partners across the globe. This strategy allows Coca-Cola to maintain impressive profit margins, with an operating margin of 32.9% and a profit margin of 23.4%.
Moreover, Coca-Cola’s commitment to rewarding its shareholders is evident in its dividend history. The company has increased its dividend for 62 consecutive years, offering a forward annual yield of 3.1% as of May 8th, 2024.
Procter & Gamble
Today, I took an inventory at home and discovered I own 11 products from The Procter & Gamble Company (NYSE: PG).
Some familiar ones you might recognize include Tide detergent, Crest toothpaste, Gillette razors, Pampers diapers, and Pantene shampoo. Unlike your fancy tech gadgets or restaurant to dine out, you’ll probably keep buying these through thick and thin.
Like Coca-Cola, Procter & Gamble also boasts impressive double-digit operating and profit margins. However, what truly stands out for me is the company’s remarkable 31.8% return on equity.
Put simply, this figure indicates how effectively the company uses shareholder equity to generate profits. A return on equity of 31.8% means that Procter & Gamble is highly efficient in turning the capital invested by shareholders into additional earnings.
Finally, much like Coca-Cola, Procter & Gamble stands out as a dividend king. This year, it increased its dividend by 7% – marking the 68th consecutive year of dividend growth, with a current yield of 2.43%.
