RRSP Investors: Buy These Top Dividend Stocks for Total Returns

RRSP investors can consider adding blue-chip dividend stocks such as Tourmaline Oil to their equity portfolios in 2024.

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The RRSP (Registered Retirement Savings Plan) is a popular account among Canadians as it helps lower the tax bill significantly each year. For example, you can contribute up to 18% of your annual income towards this registered account each year. So, if you earn $75,000 annually, you can allocate up to $13,500 to the RRSP, reducing your taxable income to $$61,500.

The RRSP can hold a variety of qualified investments that include stocks, bonds, exchange-traded funds, and mutual funds. However, as the RRSP is a retirement account, you can consider holding blue-chip dividend stocks that will help you generate outsized gains over time via capital gains and a regular dividend stream. Here are two top dividend stocks RRSP investors buy in June 2024.

Tourmaline Oil stock

Valued at $22 billion by market cap, Tourmaline Oil (TSX:TOU) explores for and develops oil and natural gas properties in the Western Canadian Sedimentary Basin. Tourmaline Oil pays shareholders an annual dividend of $1.28 per share, indicating a forward yield of over 2%. However, it also pays shareholders a special dividend each year depending on its cash flows. In 2023, Tourmaline Oil paid cumulative dividends amounting to $6.55 per share, indicating a trailing yield of more than 10%.

In the first quarter (Q1) of 2024, Tourmaline Oil reported a free cash flow of $309.8 million, or $0.87 per share. Comparatively, its base dividend per share is $0.32, indicating a payout ratio of 37%. A low payout ratio allowed Tourmaline Oil to reduce its net debt by $85 million in Q1 of 2024. It ended the quarter with a net debt of $1.69 billion and aims to reduce its net debt by at least $290 million going forward.

Priced at 14 times forward earnings, Tourmaline Oil stock is quite cheap and trades at a discount of 23% to consensus price target estimates.

National Bank of Canada stock

Valued at $36 billion by market cap, National Bank of Canada (TSX:NA) pays shareholders an annual dividend of $4.40 per share, indicating a yield of 4.1%. Last week, National Bank of Canada announced plans to acquire Canadian Western Bank for $5 billion, which will allow the former to further diversify its revenue streams.

With $37 billion in loans, Canadian Western Bank offers services in verticals such as business and personal banking, equipment financing, trust services, and wealth management. The acquisition will increase National Bank’s commercial banking portfolio by 52% while adding earning power and enhancing loan and revenue diversification.

Moreover, National Bank has identified $270 million of pre-tax annual cost and funding synergies, in addition to upside from cross selling opportunities.

Down 10% from all-time highs, National Bank of Canada stock has returned more than 1,000% to shareholders in the last two decades after adjusting for dividends. During this period, National Bank has raised dividends by 9% annually, significantly enhancing the yield at cost.

Priced at 10 times forward earnings, National Bank of Canada stock trades at a discount of 12% to consensus price target estimates.

Canadian investors can identify other such blue-chip dividend stocks and diversify their portfolios further.

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 recommends Tourmaline Oil. The Motley Fool has a disclosure policy.

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