A Top Dividend Stock for Your RRSP in 2018

Here’s why BCE Inc. (TSX:BCE) (NYSE:BCE) might be an attractive pick today.

| More on:
The Motley Fool

Canadian savers are searching for ways to set aside sufficient funds to finance a comfortable retirement.

One option involves buying dividend-growth stocks inside your RRSP and investing the distributions in new shares. This sets off a powerful compounding process that can turn a modest initial investment into a nice nest egg over time.

The RRSP is a good choice for people who find themselves in a higher marginal tax bracket, as the contributions can be used to lower taxable income. Ideally, when you retire and start to pull the funds out of the RRSP, the money will be taxed at a lower rate.

The RRSP is also a good option for Canadians who have a tendency to dip into their savings. The withdrawal holdbacks that are part of the RRSP rules tend to make people think twice about tapping the funds. However, this isn’t the case with cash or TFSA investments.

Which stocks should you own?

The best stocks to buy tend to be industry leaders with strong track records of dividend growth.

Let’s take a look at BCE Inc. (TSX:BCE) (NYSE:BCE) to see why it might be an interesting pick.

Growth

BCE completed its purchase of Manitoba Telecom Services (now known as Bell MTS) earlier this year in a move that launched the giant into the top spot in the Manitoba market and set BCE up for an expansion of its presence in the Western provinces.

The company is primarily known for its phone, Internet, and TV services, but BCE also owns a large media group that includes sports teams, a television network, specialty channels, and radio stations.

In addition, BCE has retail outlets located across the country.

When the retail and media assets are combined with the wireless and wireline network infrastructure, you get a powerful company that’s capable of interacting with most Canadians on a daily basis.

BCE recently announced plans to acquire AlarmForce, which currently has more than 100,000 customers. BCE’s existing relationship with millions of Canadian homeowners and businesses positions it well to boost sales of the security service.

BCE also just launched Lucky Mobile, a low-cost prepaid wireless service that doesn’t require customers to have a contract. The move is designed to position BCE in a segment it hasn’t targeted for some time.

Dividends

BCE has a strong track record of dividend growth, and that should continue in step with rising free cash flow.

At the time of writing, the distribution provides a yield of 4.6%.

Should you buy?

BCE is a solid RRSP pick for investors who want to buy a reliable high-yield dividend stock and sit on it for decades.

Growth won’t shoot the lights out, but BCE still has opportunities, as we have seen with the recent acquisitions and new prepaid service launch. In addition, the company has the power to raise prices when it needs some extra cash.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Walker owns shares of BCE Inc.

More on Dividend Stocks

Train cars pass over trestle bridge in the mountains
Dividend Stocks

Is CNR Stock a Buy, Sell, or Hold for 2025?

Can CNR stock continue its long-term outperformance into 2025 and beyond? Let's explore whether now is a good time to…

Read more »

coins jump into piggy bank
Dividend Stocks

The Smartest Dividend Stocks to Buy With $500 Right Now

These top dividend stocks both offer attractive yields and trade off their highs, making them two of the best to…

Read more »

Middle aged man drinks coffee
Dividend Stocks

Here’s the Average TFSA Balance at Age 35 in Canada

At age 35, it might not seem like you need to be thinking about your future cash flow. But ideally,…

Read more »

ETF stands for Exchange Traded Fund
Dividend Stocks

How to Invest Your $7,000 TFSA Contribution in 2024

Here's how I would prioritize a $7,000 TFSA contribution for growth and income.

Read more »

a man relaxes with his feet on a pile of books
Dividend Stocks

CPP Pensioners: Watch for These Important Updates

The CPP is an excellent tool for retirees, but be sure to stay on top of important updates like these.

Read more »

Technology
Dividend Stocks

TFSA Investors: 3 Dividend Stocks I’d Buy and Hold Forever

These TSX dividend stocks are likely to help TFSA investors earn steady and growing passive income for decades.

Read more »

four people hold happy emoji masks
Dividend Stocks

Love Dividend Growth? Check Out These 2 Income-Boosting Stocks

National Bank of Canada (TSX:NA) and another Canadian dividend-growth stock are looking like a bargain going into December 2024.

Read more »

An investor uses a tablet
Dividend Stocks

A Dividend Giant I’d Buy Over Enbridge Stock Right Now

Enbridge stock may seem like the best of the best in terms of dividends, but honestly this one is far…

Read more »