Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

RRSP Savings: 2 Top TSX Dividend Stocks to Build Retirement Wealth

Stock Markets May 28, 2022 14:15
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. RRSP Savings: 2 Top TSX Dividend Stocks to Build Retirement Wealth

Canadian investors are taking advantage of their RRSP contribution space to build retirement portfolios that can supplement OAS, CPP, and company pensions down the road. One popular RRSP investing strategy involves buying top dividend stocks and using the distributions to acquire new shares.

What’s the power of compounding? Canadians learn how the power of compounding works at a very young age, even if they aren’t fully aware of math behind the process.

Anyone who has made a snowman has harnessed the power of compounding. You start with a small snowball, and each time you roll the ball, it picks up more snow, making the ball larger. That, in turn, picks up even more snow on the next roll, and so on, until the initial ball that once fit in the palm of your hand becomes a large snow boulder.

The same strategy can be applied to building wealth for retirement inside a self-directed RRSP. Investors can buy top dividend stocks and use the distributions to buy additional shares. Some companies even offer a discount of up to 5% on the new shares under their dividend-reinvestment plan (DRIP).

The process takes time to build the portfolio, but small initial investments can become significant savings over two or three decades. This is particularly the case when the stock price rises along with the dividends.

Let’s take a look at two top TSX dividend stock that are good examples of how the process works.

Fortis Fortis (TSX:TSX:FTS)(NYSE:FTS) is a utility company with power generation, electricity transmission, and natural gas distribution businesses in Canada, the United States, and the Caribbean. The company gets 99% of its revenue from regulated assets, so cash flow tends to be very reliable.

Fortis grows through a combination of strategic acquisitions and internal development projects. The current $20 billion capital program is expected to increase the rate base by about $10 billion through 2026. The resulting increase in revenue should support average annual dividend hikes of 6% until at least 2025.

Fortis raised the dividend in each of the past 48 years. The current payout provides a yield of 3.3%.

Long-term investors have done well with the stock. A $10,000 RRSP investment in Fortis 25 years ago would be worth about $200,000 today with the dividends reinvested.

Royal Bank Royal Bank (TSX:RY (TSX:RY))(NYSE:RY) just reported another strong quarter with net income of $4.25 billion. The bank is a profit machine and continues to grow its global presence through strategic acquisitions.

Royal Bank recently announce a $2.6 billion deal to buy a wealth management business in the United Kingdom. Royal Bank’s CET1 ratio of more than 13% means it has significant excess cash it can deploy on other deals.

Royal Bank is also investing in digital technologies to ensure it remains competitive in the rapidly changing consumer and small business banking sector.

The board just raised the dividend by 7%. This is in addition to an increase of 11% late last year. The share price is off the 2022 high, giving investors a chance to buy Royal Bank on a decent pullback.

Buy-and-hold investors have received attractive total returns. A $10,000 investment in Royal Bank stock 25 years ago would also be worth about $200,000 right now with the dividends reinvested.

The bottom line on RRSP investing Fortis and Royal Bank are good examples of top dividend stocks that can help investors build significant retirement wealth by reinvesting dividends in new shares. Future gains from these stocks might not be the same, but Fortis and Royal Bank remain attractive picks for a diversified RRSP portfolio focused on total returns.

The post RRSP Savings: 2 Top TSX Dividend Stocks to Build Retirement Wealth appeared first on The Motley Fool Canada.

The Motley Fool recommends FORTIS INC. Fool contributor Andrew Walker owns shares of Fortis.

This Article Was First Published on The Motley Fool

RRSP Savings: 2 Top TSX Dividend Stocks to Build Retirement Wealth

Related Articles

Bitcoin Crash: Why Did it Fall So Fast? (54% in 2022)
Bitcoin Crash: Why Did it Fall So Fast? (54% in 2022) By The Motley Fool - Jun 27, 2022

The largest cryptocurrency by market capitalization lost steam after posting an all-time high of US$67,566.83 on November 8, 2021. In less than a month, the price sunk below...

UiPath to Cut 5% of Global Workforce
UiPath to Cut 5% of Global Workforce By - Jun 27, 2022

By Sam Boughedda In a Securities and Exchange Commission filing, software company UiPath (NYSE:PATH) said they have approved restructuring actions to manage operating expenses,...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Our Apps
© 2007-2022 Fusion Media Limited. All Rights Reserved.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
  • Sign up for FREE and get:
  • Real-Time Alerts
  • Advanced Portfolio Features
  • Personalized Charts
  • Fully-Synced App
Continue with Google
Sign up with Email