TFSA and RRSP investors are searching for top TSX dividend stocks that will provide reliable distributions and generate decent capital gains in a buy-and-hold retirement portfolio.
Bank of Montreal
Bank of Montreal (TSX:BMO)(NYSE:BMO) raised its dividend by 25% for fiscal 2022. The bank built up significant excess cash over the past two years and is using the funds to boost payouts, buy back shares, and make acquisitions.
Bank of Montreal is buying Bank of the West for US$16.3 billion in a deal that will expand its presence in the American market and give the bank a strong foothold in California. The purchase adds more than 500 branches, 1.8 million customers, US$56 billion of loans and US$89 billion of deposits.
Management says the transaction will be immediately accretive to adjusted earnings per share on closing and is expected to be 10% accretive in 2024.
Bank of Montreal paid its first dividend in 1829. Investors have received a piece of the profits every year since that time. The bank has a balanced revenue stream coming from personal and commercial banking, capital markets, and wealth management activities. The purchase of Bank of the West should drive solid future growth and will further diversify the revenue base.
At the time of writing, the stock trades near $138 per share compared to the 2022 high around $154, so investors have a chance to buy BMO stock on a nice dip. The current dividend yield is 3.85%.
Long-term investors have done well with the stock. A $10,000 investment in Bank of Montreal 25 years ago would be worth about $150,000 today with the dividends reinvested.
TC Energy
TC Energy (TSX:TRP)(NYSE:TRP) raised its dividend by 3% for 2022. That’s the 22nd consecutive annual distribution increase. The company expects average annual EBITDA growth to be 5% over the next few years, driven by a $24 billion capital program. This should support ongoing dividend hikes in the 3-5% range.
The company is primarily a natural gas transmission and storage business, but it also has oil pipelines and power generation facilities.
The natural gas market is expected to grow in the coming years, and North American producers should benefit. Natural gas is a cleaner fuel to burn than coal or oil for producing power, so many utilities around the globe are switching to natural gas to generate electricity while they ramp up their renewable energy investments. Liquified natural gas (LNG) can be shipped around the world. LNG facilities are being built in the United States and Canada to help meet the rising demand and TC Energy has the network infrastructure in place, or under construction, to move the natural gas from producers to the LNG plants.
TRP stock currently provides a dividend yield of 5.1%.
A $10,000 investment in TC Energy 25 years ago would be worth about $85,000 today with the dividends reinvested.
The bottom line on top dividend stocks
Bank of Montreal and TC Energy are top dividend stocks that should continue to deliver steady payout growth and attractive total returns for TFSA and RRSP investors. If you have some cash to put to work in a buy-and-hold retirement fund, these stocks deserve to be on your radar.
