RRSP Investors: Buy These Top Dividend Stocks for Total Returns

These two U.S. dividend king stocks are excellent holdings for an RRSP.

| More on:
RRSP (Registered Retirement Savings Plan) on wooden blocks and Canadian one hundred dollar bills.

Source: Getty Images

As an investor, total return is your ultimate measure of success, combining both the dividends you receive and the appreciation in share price.

While chasing high-yield stocks can be tempting, focusing solely on dividends might lead you to overlook the more significant potential gains from share price increases, which are often more tax-efficient.

However, within an RRSP (Registered Retirement Savings Plan), you have a unique advantage, especially with U.S. stocks.

Typically, dividends from U.S. companies would be subject to a 15% withholding tax, but within an RRSP, this tax is waived, making it an ideal place to hold such investments.

Here are two top U.S. dividend kings – companies that have increased their dividends for over 50 consecutive years – that have robust compounding potential for long-term growth in your RRSP.

Coca-Cola

Coca-Cola (NYSE:KO) is a standout example of a dividend powerhouse, having increased its dividend annually for an impressive 62 years.

Over the last five years alone, its dividend has grown by an annualized rate of 3.8%, consistently outpacing inflation. Currently, Coca-Cola offers a dividend yield of 2.7%.

Besides its attractive dividend, the company boasts low volatility with a beta of just 0.6. This means Coca-Cola’s stock price tends to be less affected by market swings, making it a safer bet during turbulent times.

One of the keys to Coca-Cola’s success is its unique business model. The company focuses on producing syrup concentrate, which it then sells to a global network of bottlers who mix, bottle, and distribute the final products. This system allows Coca-Cola to enjoy hefty operating margins of 32.5% and profit margins of 22.9%.

Coca-Cola’s return on equity (ROE), a measure of financial efficiency that gauges how well a company uses investments to generate earnings growth, stands at an impressive 38.8%. This indicates that Coca-Cola is not only profitable but also very effective at reinvesting its earnings back into the company.

Additionally, Coca-Cola has a rich history of stock splits – something that appeals to many investors. If you had bought just one share back in 1919 and held onto it through all the splits, today you would own 9,216 shares!

Procter & Gamble

Procter & Gamble (NYSE:PG) is another staple in many households, with a product lineup that includes everyday essentials.

Such products you might use include Tide detergent, Crest toothpaste, Gillette razors, Pampers diapers, and Pantene shampoo.

The company’s stock exhibits low volatility with a beta of 0.4, reflecting the non-discretionary spending habits associated with its products – people tend to purchase these items regardless of economic conditions.

Like Coca-Cola, Procter & Gamble also boasts robust profitability, with operating and profit margins of 21.4% and 17.7%, respectively. Its ROE stands at an impressive 30.7%, signalling efficient use of equity capital to generate profits.

When it comes to dividends, Procter & Gamble offers a yield of 2.3%, backed by an extraordinary record of 68 consecutive years of dividend growth. Over the last five years, the dividend has grown at an average rate of 5.9% annually.

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 Tony Dong has no position in any of the stocks mentioned. The Motley Fool recommends Walmart. The Motley Fool has a disclosure policy.

More on Investing

coins jump into piggy bank
Dividend Stocks

Invest $15,000 in This Dividend Stock for $61 in Monthly Passive Income

Monthly passive income is well within reach, especially when you have a solid dividend stock like this on hand.

Read more »

RRSP (Registered Retirement Savings Plan) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

RRSP: 2 Reliable Canadian Dividend Stocks to Own for Decades

These stocks offer high yields and a shot at decent capital gains.

Read more »

concept of real estate evaluation
Dividend Stocks

Invest $7000 in This Dividend Stock to Make $600 in Passive Income

Looking to make monthly passive income? Timbercreek Financial (TSX:TF) stock's 8.6% dividend yield could turn into a steady stream of…

Read more »

woman analyze data
Investing

3 Top Stocks to Buy in October for Value-Hunting Canadians

Given their healthy long-term growth potential and discounted stock prices, I am bullish on these three TSX stocks.

Read more »

space ship model takes off
Dividend Stocks

Dividend Investors: 2 Stocks That Could Soar in 2025

These top TSX dividend stocks might be oversold right now.

Read more »

Start line on the highway
Dividend Stocks

TFSA Passive Income: 4 Stocks to Buy and Never Sell

Looking for stocks that create perfect passive income? This TFSA dream team is the perfect portfolio just waiting to happen.

Read more »

A close up color image of a small green plant sprouting out of a pile of Canadian dollar coins "loonies."
Bank Stocks

Is TD Bank Stock a Buy for its 5% Dividend Yield?

Despite short-term challenges after its U.S. AML settlement, TD Bank’s 5% dividend yield, alongside these factors, make it an attractive…

Read more »

analyze data
Dividend Stocks

Is Canadian Tire Stock a Buy for its 4.4% Dividend Yield?

Canadian Tire may have a current dividend yield of 4.4%, but that's not the only reason to buy the high-quality…

Read more »