2 Canadian Stocks to Buy and Hold Forever in Your RRSP

Hold blue-chip, recession-resistant stocks in your RRSP such as Waste Connections and GFL to benefit from steady gains.

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The Registered Retirement Savings Plan (RRSP) is a retirement account that provides you with taxable benefits. Basically, any contributions made towards this account up to a certain limit will lower your tax liability. So, if you earn $100,000 each year, you can contribute up to $18,000 towards the RRSP, reducing your taxable income to $82,000.

Alternatively, investors should note that withdrawals from the RRSP will be taxed. But as the RRSP is a retirement account, you would ideally pay fewer taxes as your income would be much lower in retirement.

It also means you should use the RRSP to invest in inflation-beating asset classes such as stocks, mutual funds, and exchange-traded funds. While investors should allocate a significant portion of their investments towards low-cost ETFs that track indices such as the S&P 500, a small portion can be used to purchase quality Canadian stocks such as GFL Environmental (TSX:GFL) and Waste Connections (TSX:WCN). Let’s see why.

The bull case for GFL stock

Valued at $20 billion by market cap, GFL Environmental is the fourth-largest diversified environmental services company in North America. It provides solutions such as solid waste management, liquid waste management, and soil remediation through its platform of facilities in Canada and the U.S.

In the first quarter (Q1) of 2024, GFL reported revenue of $1.8 billion. After adjusting for divestitures, its solid waste sales grew by 8.8% year over year due to pricing and operating efficiency initiatives.

GFL ended Q1 with an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of 25.8%, an increase of 80 basis points compared to the year-ago period.

GFL continues to divest non-core assets and use the proceeds to reinvest in accretive acquisitions or lower balance sheet debt. It expects acquisitions to contribute $100 million in annualized sales in 2024 as it deploys capital in growth projects related to RNG (renewable natural gas).

It also expects to end the year with adjusted EBITDA of $2.24 billion, up from its prior forecast of $2.2 billion, while it has a net leverage target of 3.65 times and 3.85 times.

Priced at 55 times forward earnings, GFL stock trades at a premium. But Bay Street expects earnings to improve by 50% year over year from $0.97 per share in 2024 to $1.46 per share in 2025.

Is Waste Connections stock a good buy?

Valued at $60 billion by market cap, Waste Connections is a solid waste services company that provides solutions such as non-hazardous waste collection, transfer, and disposal by rail. It also provides non-hazardous oilfield waste treatment, recovery, and disposal services. Waste Connections serves nine million residential, commercial, and industrial customers in North America.

Similar to GFL Environmental, Waste Connections is part of a recession-resistant industry and reported revenue of $2.07 billion in Q1, up from $1.9 billion last year. Its adjusted net income rose to $268.7 million or $1.04 per share in the March quarter, up from $230.4 million or $0.89 per share in the year-ago period.

Priced at 35.5 times forward earnings, analysts expect the company’s earnings to grow by 18% annually in the next five years. The TSX stock also pays shareholders an annual dividend yield of $1.56, indicating a forward yield of 0.7%.

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 Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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