There are a lot of healthy dividend stocks trading in the TSX at any given time, and a significant proportion of them are Aristocrats: stocks that have raised their payouts for more than five consecutive years.
Thanks to their stellar dividend histories, these stocks offer more credibility and peace of mind than other dividend stocks. Some stocks stand out even among investors for their compelling histories, financial stability, or sector affiliations.
There are two great dividend stocks that you can buy and stash in your Registered Retirement Savings Plan (RRSP), one of the two most prominently used tax-sheltered accounts in Canada for building your retirement nest eggs.
This is particularly true for the RRSP because the dividend income you produce within this account cannot be cashed out and serves as passive income. However, it can be invested within RRSP to enhance your nest egg’s size and growth pace.
The oldest Aristocrat in Canada
Canadian Utilities (TSX:CU) has become the first Dividend King in Canada — the stock has raised its payout for more than 50 consecutive years. This makes it unique, especially in terms of dividend safety and long-term sustainability. The sustainability factor is further augmented by the nature of its business—utility, which is among the most low-volatility stocks (and businesses) with safe/reliable revenues.
The dividends aren’t just safe; they are also pretty healthy, thanks to a generous 6% yield the stock is now offering. If you park about $20,000 of your RRSP savings into this account, it can generate a monthly income of about $100, which you can use to invest in other stocks or keep as cash in your RRSP.
A price slump is the reason behind this generous yield, and it has also made the stock’s valuation relatively attractive.
A banking Aristocrat
Bank stocks are easily among Canada’s best and most trusted dividend payers, and Canadian Imperial Bank of Commerce (TSX:CM) is no exception. It’s one of the five largest banking institutions in the country and currently offers a healthy yield of about 5.4%, which is neither too high nor too low compared to the rest of the banking sector.
However, it’s also among the most attractively valued Canadian banks right now, and the stock is relatively stable thanks to the strong earnings it posted a few weeks ago. While capital appreciation potential is not the strongest suit of this bank stock, it did rise about 20% in the last 12 months, and if it keeps to this pace, it may double the capital of its investors in the next five years.
Foolish takeaway
Choosing the right dividend stocks for an RRSP can differ from choosing dividend stocks for a Tax-Free Savings Account — the other tax-sheltered account in Canada. However, the core conventions of a good dividend stock still hold, and these two stocks fit the bill.
