When it comes to building long-term wealth inside a Registered Retirement Savings Plan (RRSP), high-quality Canadian dividend stocks are unquestionably some of the most important you will buy.
While growth stocks often get the most attention for their excitement, and value stocks are always rewarding to discover, reliable dividend-paying businesses are what quietly do the heavy lifting over decades.
That’s especially true inside an RRSP. Because dividends and capital gains are tax deferred, every dollar you earn stays invested and continues compounding until you withdraw it. Therefore, the longer that money stays inside the account, the more powerful that compounding becomes.
The key is focusing on high-quality companies with reliable cash flow, sustainable payouts, and long-term growth potential. You don’t need the highest yield on the market. In fact, high-yield stocks are often riskier and offer less growth potential. Instead, you want to buy Canadian dividend stocks that you can have confidence holding for years to come through any market environment.
So, if you’re looking to boost the passive income your portfolio generates before the new year, two of the best Canadian dividend stocks to buy right now are Granite REIT (TSX: GRT.UN) and Pizza Pizza Royalty (TSX: PZA).
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One of the best dividend-growth stocks Canadian investors can buy today
If you’re looking for a stock that’s reliable, pays an attractive dividend, is reasonably valued, and still offers long-term growth potential, Granite is an ideal stock to buy now.
It’s one of the highest-quality real estate investment trusts (REITs) on the TSX, owning a portfolio of industrial, logistics, and warehouse properties across North America and Europe.
Demand for these types of properties isn’t just strong; it’s been growing rapidly, which makes Granite a perfect dividend-growth stock for investors to own in their RRSPs.
For example, even as Granite continues to increase its dividend each year, its payout ratio is actually falling, as earnings growth continues to outpace dividend growth.
So, right now, Granite offers a yield of 4.4%, has a payout ratio of just 68%, and is still trading at a compelling valuation. In fact, Granite currently trades at a forward price-to-adjusted funds from operations (P/AFFO) ratio of just 14.3 times. That’s low for a REIT with this level of reliability and long-term growth potential, and below its historical average of closer to 15 times.
So, if you’re looking for a reliable dividend growth stock to buy in your RRSP today, Granite is one of the best Canadian businesses to consider.
A top royalty business
In addition to Granite, Pizza Pizza is another top Canadian dividend stock to buy for your RRSP because of its extremely straightforward business model that’s easy for any investor to understand.
Pizza Pizza doesn’t operate restaurants or deal with day-to-day costs like labour or food inflation. Instead, it earns a royalty on system sales from every Pizza Pizza and Pizza 73 location across Canada. That royalty-based structure creates stable, predictable cash flow and keeps expenses low and consistent.
Therefore, because earnings are so predictable, Pizza Pizza is able to maintain a payout ratio near 100% and return essentially all of its earnings to investors. That’s what makes it such a reliable dividend stock, especially since system sales don’t tend to fluctuate much over time.
Furthermore, Pizza Pizza has proven for years that it’s more defensive than you might think. For example, inflation can actually help the business, since higher prices lead to higher system sales.
In addition, Pizza is also a resilient category, and Pizza Pizza is widely known as one of the most convenient and affordable brands in Canada. All of that helps demand hold up even when consumers tighten their budgets, which protects royalty income during slower economic periods.
So, if you’re looking for a reliable high-yield dividend stock to buy for your RRSP, Pizza Pizza currently offers a yield of 5.9%.
