Millennials are looking for ways to set some cash aside for their retirement years.
Let’s take a look at Fortis Inc. (TSX:FTS)(NYSE:FTS) and Royal Bank of Canada (TSX:RY)(NYSE:RY) to see why they might be interesting picks.
Fortis
Fortis owns natural gas distribution, electricity transmission, and power-generation assets located in Canada, the United States, and the Caribbean.
The majority of the company’s investment has been in the United States in recent years, including the 2016 acquisition of Michigan-based ITC Holdings Corp. and the 2014 purchase of Arizona-based UNS Energy.
Fortis now has about 60% of its assets located in the United States, providing investors with an opportunity to get some decent U.S. exposure through a Canadian stock.
Most of the company’s revenue comes from regulated businesses, so cash flow should be both predictable and reliable.
Fortis plans to increase the dividend by at least 6% per year through 2021. Investors should feel comfortable with the outlook considering the company has raised the distribution every year for more than four decades.
The current payout yields 3.9%.
Long-term investors have done well with this stock. A single $5,000 investment in Fortis just 20 years ago would now be worth $88,000 with the dividends reinvested.
Royal Bank
Royal Bank generated more than $10 billion in profits last year.
Canadians might not like their banks, and people regularly complain about all the rising charges, but investors are all smiles, and it might be a good idea to join them.
Royal Bank’s secret lies in its diversified revenue. The company depends heavily on its Canadian personal and commercial banking operations, but it also has strong wealth management, insurance, and capital markets operations.
With the Canadian economy working its way through some headwinds, Royal Bank has decided to head south in search of new investments. The company spent US$5 billion in late 2015 to acquire California-based private and commercial bank City National.
The group is already contributing to Royal Bank’s wealth management earnings, and investors could see more deals in the space in the coming years.
Royal Bank has a strong track record of dividend growth, and that trend should continue. The distribution yields 3.6%.
A $5,000 investment in Royal Bank 20 years ago would also be worth $88,000 today with the dividends reinvested.
Is one more attractive?
Both stocks are strong buy-and-hold candidates for an RRSP portfolio.
Royal Bank has enjoyed a nice rally recently and is probably due for a healthy dip. Fortis, however, has pulled back over the past three months and now looks to be fairly priced.
At this point, I would probably make the utility company the first pick.
