Canadians use their self-directed Registered Retirement Savings Plan (RRSP) accounts to build investment portfolios that will complement government and work pensions. Investors who missed the TSX rally this year are wondering which dividend stocks might still be attractive and good to buy for a portfolio focused on yield and total returns.
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Fortis
Fortis (TSX: FTS) raised the dividend in each of the past 50 years. This is the type of stock RRSP investors with buy-and-hold strategies should seek out when looking for companies to add to their portfolios.
Fortis grows through a combination of strategic acquisitions and development projects. Management hasn’t made a large acquisition for several years, but Fortis is working through a $25 billion capital program that is expected to increase the rate base from $37 billion in 2023 to $49.4 billion in 2028. As new assets go into service, the increase in cash flow should support planned annual dividend hikes in the range of 4% to 6%.
Fortis is up about 20% in the past six months. More gains could be on the way as interest rates continue to fall in Canada and the United States.
Bank of Montreal
Bank of Montreal (TSX: BMO) paid its first dividend in 1829. Investors have received a distribution in every year since that time.
The stock is up from $110 in late August to around $128 at the time of writing, but is still well below the $152 it reached in 2022. Banks should start reporting lower provisions for credit losses (PCL) in the coming quarters as falling interest rates on both sides of the border ease pressure on borrowers who are carrying too much debt and were hit hard by the sharp rate increases that occurred in 2022 and 2023.
The stock fell out of favour with investors as a result of a large acquisition in the U.S. market in 2023, but the deal should be positive for shareholders over time. Bank of Montreal has been successful building its U.S. business over the past 40 years and the presence in the American market should help drive long-term growth. Investors who buy BMO stock at the current level can get a dividend yield of 4.8%.
Telus
Telus (TSX: T) has increased its dividend annually for more than 20 years. The communications firm gets most of its revenue from mobile and internet subscriptions, often bundled with TV packages. These services tend to be recession-resistant. Everyone needs a phone and an internet connection and most people, especially customers that like sports, will cut other discretionary spending before giving up their TV.
Telus took a hit in the past two years as rising interest rates drove up debt expenses. The company borrows money to partially fund its capital programs. Interest rates are expected to continue falling in Canada in the coming months and through next year. This, along with reduced operating costs from staff reductions, should help the bottom line in 2025.
Canadian telecoms still face some headwinds heading into next year, but Telus is probably oversold right now. Investors who buy Telus stock at the current level can get a dividend yield of 7%.
The bottom line on top dividend stocks
Fortis, Bank of Montreal, and Telus all pay good dividends that should continue to grow. If you have some RRSP cash to put to work, these stocks deserve to be on your radar.
