When it comes to your RRSP (Registered Retirement Savings Plan), you should think long-term compounders that can help your retirement nest egg snowball over time. Indeed, the less trading, the better. While buying a stock with the intent of holding forever may not be practical, given the rise of AI and its potential to challenge moats, I still think it’s best to think a few years out into the future.
After all, should circumstances change, you can always adjust accordingly, lighten up, take profits, or add to a position. In any case, a high degree of predictability and, of course, a growth edge could be best when it comes to top-tier dividend payers.
While it’s perfectly fine to reach for the highest yielders without putting (as much) thought into dividend growth or appreciation potential, I do think that the farther away you are from retirement (think 10 years or more), the more things should be tilted towards the side of dividend growth. In any case, you can have a fat yield alongside high single-digit percentage (or maybe even a bit more in the good years) dividend appreciation over the long haul. And, in this piece, we’ll look at two names that might make sense to buy and hold until retirement day.
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Enbridge
Enbridge (TSX: ENB) stock is one of the largest firms on the TSX Index now, and it’s one of the yield-heaviest of the blue chips, even after its 55% two-year gain. While a 5.2% yield might be on the low side for a company like Enbridge, I still think the main reason to hang on forever lies in the dividend growth potential.
What’s more important than just the history of generous annual dividend raises is how reliable the pipeline has been through turbulent times. Sure, it’s nice to have big dividend hikes when times are good, but when it comes to dividend stocks for a long-term RRSP portfolio, I believe that stocks ought to be judged based on how the dividend fared during difficult times.
When it comes to Enbridge, the dividend has made it through industry challenges. And management even had what it took to keep the dividend raises coming. In short, when the going gets tough, Enbridge has demonstrated not only that it can keep its payout intact, but it can keep growing it, even as others seriously consider cuts. All considered, the midstream energy giant has a fairly large dividend, but, more importantly, it has one that’s healthy with enough wiggle room to survive even the hard years.
CN Rail
While Enbridge has a yield on the lower end of its historical range, CN Rail (TSX: CNR) has one that’s on the higher end, with shares yielding more than 2.6%. For a rail, that’s pretty solid. But, of course, to get here, the stock had to do nothing for the past five years. With so much volatility and not much to show in gains over this period, questions linger as to whether it’s a good idea to buy as the industry rolls through more turbulence.
Though less timely, I do believe that CNR stock remains a great value bet for long-term investors. At 17.5 times forward P/E, shares are close to the cheapest they’ve been in the past decade. Though intermodal showed some encouraging signs last quarter, investors should prepare for more ups and downs over the coming years. In any case, the dividend is poised to keep on growing as usual and for long-term risk-off investors, that ought to be good enough.
