RRSP Wealth: 2 Great Canadian Dividend Stocks to Buy in June

Dividend stocks like Brookfield Asset Management (TSX:BAM) can be great RRSP holdings.

| More on:

Source: Getty Images

Canadian dividend stocks are among the best assets to hold in your Registered Retirement Savings Plan (RRSP) or Tax-Free Savings Account (TFSA). Boasting high-income potential and fairly dependable total returns, they are among the best assets in the country.

Not only are Canadian dividend stocks good assets in themselves, but they are not exposed to withholding taxes like foreign dividends are. Technically, holding any U.S. dividend stock in an RRSP spares you that country’s withholding tax, but there are other countries that have no tax treaties with Canada. So, Canadian dividend stocks have preferential tax treatment compared to global dividend stocks, even if we’re considering RRSP investments only.

The question, therefore, is which dividend stocks you’re going to hold in your RRSP. Although Canadian dividend stocks have performed well as a class, there have definitely been some losers among them. If you want to maximize the returns you earn on your RRSP investments, you need to pick your investments well. In this article, I will explore two high-quality Canadian dividend stocks that might be worth holding in your RRSP.

Brookfield Asset Management

Brookfield Asset Management (TSX:BAM) is a Canadian dividend stock that has a 3.6% dividend yield. BAM has a 72% payout ratio, which is not low, but not extremely high either. This suggests that the company’s dividend payouts are fairly safe.

Brookfield Asset Management has many, many things going for it. For one thing, it’s a world leader in asset management. It did several multi-billion-dollar fundraises in the last year, it signed a massive clean energy deal with Qatar, and one of its subsidiaries recently announced a 10.5 gigawatt power deal with Microsoft. Neither of these news items means much on its own, but together, the three of them illustrate that Brookfield is a real mover and shaker in the global asset management industry.

Brookfield Asset Management is part of Brookfield Corporation (TSX:BN), a major financial conglomerate headed by Bruce Flatt. Flatt is an extremely charismatic and successful chief executive officer (CEO) who has presided over 16% compounded annual (CAGR) growth during his 20-year tenure.

Flatt’s results speak for themselves. 16% CAGR growth is better than the S&P 500 over 20 years. Also, Flatt’s solid reputation and continual media appearances provide reason for thinking that Brookfield and Brookfield Asset Management will keep thriving in the years ahead.

Although the statement that the “CEO is charismatic and does a lot of media appearances” does not in itself prove that the CEO’s company will thrive, it does lend credence to the idea that the company will not struggle with raising money. For an asset manager like Brookfield, that’s an important advantage.

Brookfield Asset Management manages funds across real estate, infrastructure and renewables. Now, with the Microsoft deal and the data centre business, the company is leading the charge in artificial intelligence infrastructure. It’s an exciting time to be a BAM shareholder.

CN Railway

Canadian National Railway (TSX:CNR) is a Canadian dividend stock with a 2% yield, a 33% payout ratio and a 10.83% five-year compounded dividend-growth rate. This is quite a combination of good characteristics, implying that CN Railway is a fairly safe dividend stock with a lot of dividend-growth potential.

Past results don’t always predict future results, but there are several reasons to think that CNR’s success will continue into the future. For one thing, it’s a high-moat stock with only one competitor in Canada and only a few competitors in the United States. For another thing, it’s ultra profitable, with a 38% net profit margin. Finally, rail, in general, is economically indispensable, as it’s the most cost-effective way to ship goods by land. It’s no high-flying technology stock, but CNR has enough things going for it to continue thriving in the years ahead.

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 Andrew Button has no position in any of the stocks mentioned. The Motley Fool recommends Brookfield Asset Management and Canadian National Railway. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Golden crown on a red velvet background
Dividend Stocks

Dividend Powerhouses: Canadian Stocks to Fuel Your Portfolio

These two top Canadian dividend aristocrats are some of the top stocks on the TSX to buy now and hold…

Read more »

Dial moving from 4G to 5G
Dividend Stocks

This Undervalued Dividend Stock is Worth Buying Right Now

Want an undervalued dividend stock with long-term potential and a juicy yield? Here's an option you may regret not buying…

Read more »

A worker gives a business presentation.
Dividend Stocks

1 Stock I’m Buying Hand Over Fist in July Despite the Market’s Pessimism

This top dividend stock is going through a rough patch, but don't let that count out all the growth we've…

Read more »

person on phone leaning against outside wall with scenic view at airbnb rental property
Dividend Stocks

2 TSX Stocks Poised to Have a Big Summer

Restaurant Brands International (TSX:QSR) stock and another darling that could be too cheap to ignore this summer.

Read more »

HIGH VOLTAGE ELECRICITY TOWERS
Dividend Stocks

Forget Fortis Stock: Buy This Magnificent Utilities Stock Instead

Looking for high dividends and returns? Then I'm sorry, but Fortis (TSX:FTS) stock probably isn't for you.

Read more »

Increasing yield
Dividend Stocks

2 High-Yield (But Slightly Risky) Stocks to Keep Your Eye on

Have these top TSX dividend stocks finally bottomed?

Read more »

Target. Stand out from the crowd
Dividend Stocks

2 Dividend Stocks I’d Buy if They Fall a Bit

Any near-term decline in these two top Canadian dividend stocks will make them look even more attractive.

Read more »

Pile of Canadian dollar bills in various denominations
Dividend Stocks

Got $3,000? 3 Dividend Stocks to Buy and Hold for the Long Term

You can buy these three Canadian dividend stocks with an investment as low as $3,000 right now and expect to…

Read more »