The tax filing season for the income year 2024 started on February 24, 2025. Many Canadian taxpayers who contributed to the Registered Retirement Savings Plan (RRSP) on or before March 3 this year will have reduced taxable income because RRSP contributions are tax deductible.
A recent Bank of Montreal survey showed that the average RRSP contributions in 2024 rose 14% to $7,447 compared to the previous year. Besides reducing their tax bills, RRSP users want to boost retirement savings and guard against inflation.
If you missed the deadline for RRSP contributions, the next is 60 days after December 31, 2025. Expect the annual contribution limit to be higher than $32,490 or 18% of earned income in 2025, whichever is higher. RRSP users can choose to invest in either South Bow (TSX: SOBO) or Freehold Royalties (TSX: FRU) for tax-deferred money growth. Both energy stocks pay generous dividends.
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Quarterly dividends
South Bow is an independent liquids infrastructure company following the spin-off of TC Energy’s liquids pipeline business. The $7.67 billion company will operate 4,900 kilometres of crude oil pipeline and transport crude oil to North America’s highest-demand markets. SOBO outperforms year to date (+11.53%).
Like TC Energy, South Bow intends to pay a strong and sustainable base dividend, subject to board approval. The current share price is $37.83, while the forward annual dividend yield is 7.82%. Management commits to strengthening South Bow’s investment-grade financial position, pursuing low-risk capital investments, and delivering compelling returns to shareholders.
Given its highly contracted assets, South Bow boasts a stable cash flow profile due to minimal commodity price or volumetric risk. The stock commenced trading on October 2, 2024. In the three months ending December 31, 2024, revenue and recognized net income reached $488 million and $55 million, respectively.
The projected annual dividend in 2025 is $416 million, funded by the approximately $535 million distributable cash flow. However, South Bow acknowledges that U.S. tariffs and counter-tariffs by Canada are headwinds that could impact pricing. The positives include highly contracted cash flows and strong structural demand for services.
Monthly payouts
Freehold Royalties attracts income-oriented investors because of its over-the-top yield and monthly dividend payouts. At $12.69 per share, you can partake in the 8.5% dividend. A $32,490 (an approximate 2025 RRSP contribution limit) position will generate a monthly tax-deferred income of $230.13.
The $2.08 billion company receives royalty payments from oil and gas producers operating on its lands. Freehold has around 18,000 producing wells with over 380 industry operators. American oil giant Exxon Mobil is one of the corporate payors.
Its president and chief executive officer, David Spyker, said, “The strength of Freehold’s diversified, North American oil-weighted portfolio was prevalent in 2024. Our production mix has significantly changed over the past few years, where our focus on oil-weighted growth has had a substantial positive impact on our cash flows.”
Last year, Freehold returned $163 million (around 73% of funds from operations) to shareholders through dividends. Spyker added that for 2025, the company will prioritize dividends, reduce net debt and continue acquisitions throughout the year.
Financial advantage
RRSP is a top retirement account in Canada. Users get the most mileage or financial advantage with regular contributions. The best part is higher tax savings.
