3 Perfect Long-Term Stocks for Your Kids’ RESP

Prepare for university today by buying great stocks like Fortis (TSX:FTS)(NYSE:FTS) and Bank of Nova Scotia (TSX:BNS)(NYSE:BNS).

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Putting cash away for your children and their future education is one of the best gifts you can give. Graduating university without crippling loans is enough to put anyone on the right track.

Some folks hate Registered Education Savings Plans (RESPs), saying they don’t offer much flexibility if your offspring decide against post-secondary education. But the advantages far outweigh that one disadvantage. Remember, RESPs come with the education savings grant, which adds 20% to any RESP contributions (up to $2,500 worth of contributions).

If free money and giving your kids a head-start in life isn’t enough motivation, RESPs are also flexible enough that you can convert them into RRSPs if your child decides against university. You’ll just have to give the savings grant back.

The only thing left to do is deciding what’s a suitable investment for that precious cash. I have a few ideas, long-term stocks that would make any RESP look good.

Fortis

An RESP is not a place to take huge investing risks. You want to aim for singles, not home runs.

Fortis (TSX:FTS)(NYSE:FTS) shows us you can still get stellar investment returns while putting your cash to work in a low-risk stock. The power and natural gas utility offers stability, solid growth potential, and, perhaps most importantly, a long history of dividend growth.

Over the last 15 years, Fortis shares have returned an outstanding 11.84% annually if an investor reinvested dividends. That’s good enough to turn a $5,000 initial investment into one worth nearly $27,000. Just one or two long-term investments that good will transform a mediocre RESP into a great one.

The company’s dividend has marched steadily higher over the last 15 years, too. The payout has nearly quadrupled in that time, steadily churning out cash that could be reinvested in new opportunities. And the stock is low risk enough that you can continue to hold it as post-secondary gets closer and closer.

Scotiabank

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) is still my favourite bank stock. I think today is a terrific time to buy shares for the long term.

It’s well known that Canadian banking is a wonderful business. The top five banks in this country own the market, which gives them huge advantages over any potential competition. This edge is well known, yet many investors choose to ignore it simply because it’s so popular. This is a poor idea.

What really excites me about Scotiabank’s long-term growth is its Latin American assets. Some 30% of its earnings come from places like Mexico, Peru, Colombia, and Chile. The region offers various advantages compared to Canada, including better economic growth, higher net interest margins, and a more fragmented banking system, which is perfect for acquisitions.

The bank also offers a succulent 4.8% dividend — a payout that has been hiked each year for nearly a decade. With a 50% payout ratio, you’ll sleep well at night knowing your RESP is at little risk of a dividend cut.

CAPREIT

Canadian Apartment Properties REIT (TSX:CAR.UN) is one of Canada’s largest owners of residential property. Its portfolio consists of nearly 50,000 apartments and more than 11,000 manufactured home sites located in or near major centres across Canada. The company also indirectly owns portfolios of apartments in the Netherlands and Ireland.

Residential real estate is well regarded by investors because it’s recession resistant, it offers plenty of steady cash flow, and a company like CAPREIT can grow forever by acquiring existing assets or building their own.

The stock has quietly been one of the best-performing names on the Toronto Stock Exchange over the last 15 years, with shares increasing an average of 15.7% annually since 2004. That’s enough to turn a $5,000 investment into something worth more than $44,000, including reinvested dividends.

One criticism of the company is, it doesn’t pay much of a dividend. The yield is a paltry 2.5% or about half what the average REIT offers. But the company instead chooses to plough much of its earnings back into more growth, which is ultimately better for shareholders.

The bottom line

There are few investments more important than your kids’ RESP. So, don’t mess around; put that cash into great companies like Fortis, Bank of Nova Scotia, and Canadian Apartment REIT. Your children — and your wallet — will thank you when university time comes.

Should you invest $1,000 in The Bank of Nova Scotia right now?

Before you buy stock in The Bank of Nova Scotia, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and The Bank of Nova Scotia wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $21,345.77!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 24 percentage points since 2013*.

See the Top Stocks * Returns as of 4/21/25

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 Nelson Smith owns shares of BANK OF NOVA SCOTIA. The Motley Fool recommends BANK OF NOVA SCOTIA.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

close-up photo of investor Warren Buffett
Dividend Stocks

Billionaires Are Selling Berkshire Stock and Buying This TSX Stock Instead

Warren Buffett is stepping aside, leading to a drop in share price. So what's next for investors?

Read more »

Dividend Stocks

1 Magnificent Canadian Stock Down 30% to Buy and Hold Forever

Analysts are upgrading this Canadian stock that has spent way too long trending downwards.

Read more »

A plant grows from coins.
Dividend Stocks

How I’d Use $7,000 to Create a TFSA Income Stream For Life

Investors can create a reliable income stream by adding these three dividend stocks to your TFSA.

Read more »

ETF chart stocks
Dividend Stocks

Investing $7,000 in Your TFSA? Consider These 2 Canadian ETFs for Retirement

Turn $7,000 into tax-free wealth! 2 top ETFs for 4%+ dividends and retirement growth to max your TFSA this May!

Read more »

Muscles Drawn On Black board
Dividend Stocks

The Smartest Canadian Stock to Buy With $5,000 Right Now

This smartest Canadian stock can convert your $5,000 investment to about $30,595 in 10 years, more than six times your…

Read more »

happy woman throws cash
Dividend Stocks

How I’d Turn $14,000 in My TFSA into a Money-Making Machine

Investing over time in a diversified Canadian dividend ETF like the VDY is one way to make a money-making machine…

Read more »

stocks climbing green bull market
Dividend Stocks

The Smartest Canadian Stock to Buy With $3,000 Right Now

Alimentation Couche-Tard Inc (TSX:ATD) is a good TSX stock.

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

How I’d Invest $50,000 of TFSA Cash as Canada-US Trade Uncertainty Expands

We're all uncertain about how this trade war will shake out, so here are some top stocks to keep your…

Read more »