Finding top dividend stocks to put into one’s Registered Retirement Savings Plan (RRSP) is easier said than done. There are plenty of dividend traps out there, which pay unsustainably high yields that are likely to be cut. And there are others that pay out too little of their income relative to their potential, while squandering the capital they reinvest into their businesses.
That said, I’ve highlighted two key Canadian stocks below I think have done a great job at both returning capital to shareholders and maximizing shareholder value over the long term. Here’s why these two companies are dividend stocks I think are worth holding in an RRSP over the long term.
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Fortis
Based in St John’s, Newfoundland, Fortis (TSX:FTS) is an energy and gas utility service provider that operates in Canada, the United States, and the Cayman Islands. Fortis’ businesses include electricity transmission, natural gas distribution, and operating power generation sites. The company owns and operates 10 utility assets across the US and Canada, serving 3.5 million customers.
Fortis’ business model makes it a stable long-term investment. Most of the revenue the company earns is on a recurring revenue basis, which is why Fortis has been able to supply the kind of cash flow stability and dividend increases it has over time. A dividend king, Fortis has delivered more than 50 consecutive years of dividend increases, and that’s a dynamic I think can continue over the long term.
For investors looking for an industry with consistent demand across different economic cycles, the utilities sector is one to consider. In this space, I think Fortis is among the best operators. The company emphasizes organic growth through investments in its energy infrastructure. In September 2024, Fortis announced an ambitious 5-year plan, in which the company will invest $26 billion between 2025 and 2029. Fortis is also increasing its investments in renewable energy, with $7 billion earmarked for the clean energy transition.
Fortis’ growth strategies have given it consistent returns. Over the past 20 years, the company delivered 11.1% annualized returns to its shareholders. Furthermore, FTS holds the record of providing regular dividend growth over the past 51 years. That’s good enough for me.
Enbridge
Enbridge (TSX:ENB) is the market leader in energy transportation and distribution in North America. The company is famous for its vast transmission network, owning the world’s longest oil and liquid transportation network. Impressively, the amount of pipe Enbridge has laid is hard to imagine – the company has 29,104 km of active crude oil pipelines and 30,500 km of natural gas pipelines in its portfolio. Moving around 30% of all crude oil in North America and 20% of all natural gas consumed in the USA, Enbridge is a behemoth in this space that has contributed a great deal to the energy independence story in North America for a long time.
Enbridge’s market-leading position positions the company well to benefit from the growth of Canada’s oil and gas industry. As the industry reduces its dependence on the US, the company is expected to generate consistent growth. Enbridge has also proven to be a very safe stock. Most (98%) of its earnings come from low-risk sources such as government contracts and cost-of-service contracts. These contracts provide the kind of defensive cash flow stability many long-term investors (myself included) want to see.
Another reason to invest in ENB stock is the company’s strategic acquisitions and growth initiatives. The company is engaged in a number of projects, including off-shore wind farms in Europe, gas pipeline expansions, and gas utility expansions, which are expected to give the company billions of dollars in revenue.
Like Fortis, Enbridge is also known for providing regular dividend payouts. Over the past five years, the company has paid $34 billion in dividends to its shareholders, and it further plans to pay $40 billion more through dividends in the next five years.
