2 Great Canadian Dividend Stocks for RRSP Investors

The TSX Index is home to many companies that have paid growing dividends for decades.

| More on:

Canadian savers are searching for top dividend stocks to put in their RRSP portfolios. The overall market looks expensive these days, but there are still attractive picks for a buy-and-hold retirement fund.

Bank of Montreal

Bank of Montreal (TSX:BMO)(NYSE:BMO) has paid a dividend every year for nearly two centuries. That’s right; the bank issued its first dividend in 1829, and investors have received a slice of the profits annually ever since.

Dividend reliability is an important consideration for investors who want to maximize total returns on their RRSP stock holdings. This is particularly true when the distributions are used to buy new shares. The compounding process can turn small initial positions into large savings over time when dividend growth is combined with a rising share price.

Bank of Montreal is Canada’s fourth-largest bank by market capitalization. Investors often overlook the stock in favour of its peers, but Bank of Montreal probably deserves more attention. The company has a balanced revenue stream coming from several sectors, including personal banking, commercial banking, wealth management, and capital markets.

The large U.S. operations provide access to economic growth south of the border, and Bank of Montreal has lower relative exposure to the Canadian housing market than some of its peers.

The company is sitting on excess cash it built up to cover potential loan losses due to the pandemic. Deferrals and government aid helped avoid the worst-case scenario, and Bank of Montreal will look for ways to deploy the extra funds. Investors could see a generous dividend increase once the government gives the banks the green light to restart distribution hikes. In addition, share buybacks should ramp up, and Bank of Montreal could seek out a strategic acquisition to boost its U.S. business.

BCE

BCE (TSX:BCE)(NYSE:BCE) has been a favourite among dividend investors for decades. The generous payout is attractive for retirees seeking passive income and for younger investors looking to build their self-directed pension funds.

BCE has done a good job of pivoting its business to stay relevant as the communications industry evolves. The company continues to invest billions of dollars on wireless and wireline network upgrades to ensure its customers have the broadband they need, while protecting the wide moat BCE enjoys in the market.

BCE spent $2 billion on new spectrum in 2021 to prepare for an expansion of its 5G network. The next phase of the wireless sector offers BCE new revenue opportunities. A decision by the CRTC earlier this year to scrap planned cuts to wholesale internet rates sets BCE up to make clearer investment decisions on its infrastructure. The clarity should also pave the way for the stock to move higher in the next few years.

BCE’s media revenue is rebounding from the pandemic hit. In addition, roaming charges should bounce back in the coming months, as people begin to travel for work and holidays.

The stock is down from the 2021 high, giving investors a chance to buy BCE on a dip. At the time of writing, the shares trade below $63 and offer a 5.6% dividend yield.

The bottom line on top RRSP dividend stocks

Bank of Montreal and BCE have long track records of providing investors with reliable dividends and attractive total returns. If you have some cash to put to work in a buy-and-hold RRSP portfolio, these names deserve to be on your radar today.

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.

The Motley Fool has no position in any of the stocks mentioned. Fool contributor Andrew Walker owns shares of BCE.

More on Investing

open vault at bank
Dividend Stocks

Don’t Get Cute; Just Buy Stability: Top Defensive TSX Stocks to Buy Now

A healthy risk tolerance is essential for most investors, but many stray from the tried and tested, hoping to find…

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

TFSA Investors: Buy These 3 Stocks for $3,480 Yearly Tax-Free Income

One significant benefit of a TFSA-based dividend income is that it doesn’t weigh down your tax bill.

Read more »

a-developer-typing-lines-of-ai-code-while-viewing-multiple-computer-monitors
Tech Stocks

Could Constellation Software Become the Next Berkshire Hathaway?

Constellation Software's (TSX:CSU) capital-allocation strategy is similar to that of Berkshire Hathaway (NYSE:BRK.B).

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Friday, November 8

The TSX Composite benchmark remains on track to end the week with strong optimism as it currently trades with 2.4%…

Read more »

Canadian dollars in a magnifying glass
Dividend Stocks

3 High-Yield Dividend Stocks That Are Screaming Buys Right Now

Are you looking for great income stocks? Here's a trio of high-yield dividend stocks that pay insane yields right now.

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Bank Stocks

Best Stock to Buy Right Now: TD Bank or Manulife Financial?

Manulife continues to see momentum in its business and stock price, while TD Bank stock remains down and out.

Read more »

cloud computing
Tech Stocks

3 No-Brainer Tech Stocks to Buy With $1,000 Right Now

These three Canadian tech stocks could be among the best growth opportunities in the market right now.

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Dividend Stocks

Transform a $5,000 TFSA Into a $50,000 Retirement Nest Egg

The TFSA is a powerful tool that can grow a small investment into a substantial retirement nest egg over time.

Read more »