Investors who missed the big rally in the TSX this year are wondering which stocks might still be attractive and good to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on dividend income and total returns.
When markets are at record levels, it makes sense to look for stocks that have long track records of delivering dividend growth supported by rising revenue and higher cash flow. These stocks continue to pay you during market pullbacks and tend to recover from corrections and move higher over the long run.
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Fortis
Fortis (TSX: FTS) is a good example of a stock that new investors might want to consider for a buy-and-hold portfolio. The utility company has increased its dividend for 51 consecutive years and intends to raise the distribution by 4-6% annually through at least 2029.
Fortis operates power generation, electricity transmission, and natural gas distribution businesses in Canada, the United States, and the Caribbean. The company gets nearly all of its revenue from rate-regulated assets. The appeal of this for investors is that revenue and cash flow tend to be reliable and predictable, so there shouldn’t be big shocks that can put the dividend at risk.
Fortis grows through a combination of acquisitions and capital projects. The current $26 billion capital program is expected to raise the rate base from nearly $40 billion in 2024 to $53 billion by the end of 2029. As the new assets are completed and go into service, the boost to cash flow should support the planned dividend increases.
Investors who buy Fortis at the current price can get a dividend yield of about 4%.
Royal Bank of Canada
Royal Bank (TSX: RY) has paid investors a dividend each year for more than a century. The bank is a giant in the Canadian financial sector, with a current market capitalization of nearly $240 billion, and it ranks among the largest banks in the world based on that metric.
Royal Bank has diversified operations, both by segment and geography. The company has retail and commercial banking, wealth management, capital markets, insurance, and investor and treasury services, serving more than 17 million clients in 29 countries, according to the FY23 Annual Report. Canada and the United States generate most of the revenue and profits, so investors get good exposure to the U.S. through a top Canadian company.
Royal Bank stock isn’t cheap, but you are getting a world-class bank. Fiscal third-quarter (Q3) 2024 reported net income was $4.5 billion, up 16% from the same period last year. Return on equity was 15.5%, and the bank continues to maintain a solid capital position with a common equity tier-one ratio of 13%.
Investors who buy RY stock at the current level can get a dividend yield of 3.3%.
The bottom line on top TSX stocks for beginners
Fortis and Royal Bank pay good dividends that should continue to grow. If you have some cash to put to work in a self-directed buy-and-hold TFSA or RRSP, these stocks deserve to be on your radar.
