Is Suncor Energy Inc. or Toronto-Dominion Bank Better for Your RRSP Right Now?

Suncor Energy Inc. (TSX:SU)(NYSE:SU) and Toronto-Dominion Bank (TSX:TD)(NYSE:TD) are two of Canada’s top stocks. Is one an attractive RRSP pick?

| More on:

Canadian savers are searching for top stocks to add to their RRSP portfolios.

Let’s take a look at Suncor Energy Inc. (TSX:SU)(NYSE:SU) and Toronto-Dominion Bank (TSX:TD)(NYSE:TD) to see if one is more attractive today.

Suncor

Suncor reported strong Q4 2017 results, and investors could see the good times continue through 2018 and beyond.

Why?

Management took advantage of the downturn to add strategic assets at attractive prices. The acquisition of Canadian Oil Sands gave Suncor a majority stake in the Syncrude project. Suncor also increased its ownership of the Fort Hills development.

The new assets, in combination with organic developments, such as Hebron, should drive higher production, just as oil prices appear to be in recovery mode. Fort Hills and Hebron are now scaling up output.

In addition to the oil sands assets, Suncor owns refineries and more than 1,500 Petro-Canada retail locations. These assets provide a nice hedge against pullbacks in the price of oil and are a big reason Suncor’s stock price held up so well during the rout.

Suncor isn’t widely touted as a dividend pick, but the company just raised the payout by 12.5%. Management is obviously comfortable with the revenue and cash flow outlook, and investors are being rewarded.

At the time of writing, the new distribution provides an annualized yield of 3.4%.

Toronto-Dominion Bank

TD is widely viewed as the safest bet among the big Canadian banks due to its focus on retail banking activities. In addition, TD has invested heavily to build up a strong U.S. business running right down the American east coast from Maine to Florida.

In fact, TD has more branches south of the border than it does in Canada.

The U.S. operations provided more than 30% of TD’s fiscal 2017 earnings, so investors can get nice exposure to U.S. growth through the stock.

Rising interest rates have some investors worried that Canadian homeowners will default and trigger a housing crash. It’s true that a total meltdown would be bad for the banks, but TD’s mortgage portfolio is capable of riding out a downturn, and most analysts predict a gradual pullback in the housing market.

TD has a compound annual dividend-growth rate of about 10% over the past 20 years. The current payout provides a yield of 3.4%.

Is one more attractive?

Suncor and TD are two of Canada’s top companies and deserve to be on your RRSP radar.

That said, you have to be a long-term bull on oil to own Suncor. If you fall in that camp, the company is a good way to get conservative exposure to the sector.

Otherwise, TD should continue to be a strong buy-and-hold pick for RRSP investors, and the large U.S. presence provides a nice hedge against any potential downturn in Canada.

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 has no position in any stock mentioned.

More on Energy Stocks

construction workers talk on the job site
Energy Stocks

Best Stock to Buy Right Now: Baytex vs Suncor?

Suncor and Baytex stocks both look like solid companies offering growth and dividends. But which is the better buy?

Read more »

bulb idea thinking
Energy Stocks

3 Incredibly Cheap Energy Stocks to Buy Now

Energy stocks are trending upwards on the back of several key factors. And these three continue to be top cheap…

Read more »

Pumpjack in Alberta Canada
Energy Stocks

Should You Buy Freehold Royalties Stock for its 8% Yield?

Freehold Royalties is a TSX dividend stock that offers shareholders a forward yield of 8%. But is the energy stock…

Read more »

Muscles Drawn On Black board
Energy Stocks

Is Suncor Energy Stock a Good Buy?

Suncor is on a roll in 2024. Are more gains on the way?

Read more »

profit rises over time
Top TSX Stocks

3 Reasons to Buy Enbridge Like There’s No Tomorrow

Have you considered buying Enbridge (TSX:ENB)? Here are 3 reasons to buy Enbridge today for lasting growth and income.

Read more »

oil pump jack under night sky
Energy Stocks

Is CNQ Stock a Buy for its 4.5% Dividend Yield?

CNQ stock is one of the best options out there for dividend growth. But what about value? Let's take a…

Read more »

Pumpjack in Alberta Canada
Energy Stocks

Is Imperial Oil Stock a Buy, Sell, or Hold for 2025?

Imperial Oil stock is in a precarious position, so what should investors consider as we head nearer to 2025?

Read more »

construction workers talk on the job site
Energy Stocks

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

Suncor Energy stock is trading at its decade-high on uncertainty in the oil market. Should you buy, sell, or hold…

Read more »