While growth stocks often get the most attention for their excitement, and value stocks are always worth exploring, they’re reliable dividend-paying companies that have been quietly doing the heavy lifting for decades.
This is especially true within an RRSP. Because dividends and capital gains are deferred, every dollar you earn remains invested and compounded until you withdraw it. The longer the money remains in the account, the more powerful the compounded capital becomes.
The key is focusing on high-quality businesses with reliable cash flow, sustainable payouts and long-term growth potential. You don’t need the highest returns on the market. High-yield stocks are often riskier and offer less growth potential. Instead, you want to buy Canadian dividend stocks that you can confidently hold for years to come, regardless of the market environment.
So if you’re looking to increase the passive income your portfolio generates before the new year, two of the best Canadian dividend stocks to buy now are: Granite REIT (TSX:GRT.UN) and Pizza Pizza Royalty (TSX:PZA).
One of the best dividend growth stocks Canadian investors can buy today
If you’re looking for a stock that is reliable, pays an attractive dividend, is reasonably valued and still offers long-term growth potential, Granite is an ideal stock to buy now.
It is one of the highest quality real estate investment trusts (REITs) on the TSX, owning a portfolio of industrial, logistics and warehouse properties in North America and Europe.
The demand for these types of properties is not only high; it’s growing quickly, making Granite a perfect dividend growth stock for investors to own in their RRSPs.
Even if Granite continues to increase its dividend every year, its payout ratio is actually declining as earnings growth continues to exceed dividend growth.
So right now Granite offers a yield of 4.4%, has a payout ratio of just 68% and still trades at an attractive valuation. In fact, Granite currently trades at a price-adjusted fund-to-operations (P/AFFO) ratio of just 14.3 times. That’s low for a REIT with this level of reliability and long-term growth potential, and below the historical average of almost 15 times.
So if you’re looking for a reliable dividend growth stock to buy in your RRSP today, Granite is one of the best Canadian companies to consider.
A top royalty company
Besides Granite, Pizza Pizza is another top Canadian dividend stock to buy for your RRSP because of its extremely simple business model that is easy for any investor to understand.
Pizza Pizza does not operate restaurants and is not concerned with day-to-day costs such as labor or food inflation. Instead, it earns a royalty on system sales from each Pizza Pizza and Pizza 73 location across Canada. That royalty-based structure provides stable, predictable cash flow and keeps costs low and consistent.
Because profits are so predictable, Pizza Pizza is able to maintain a payout ratio of almost 100% and pay out virtually all of its profits to investors. That’s what makes it such a reliable dividend stock, especially since system sales don’t fluctuate much over time.
Moreover, Pizza Pizza has been proving for years that it is more defensive than you might think. For example, inflation can actually help the company because higher prices lead to higher system sales.
Furthermore, Pizza is also a resilient category and Pizza Pizza is widely known as one of the most convenient and affordable brands in Canada. All this helps maintain demand even as consumers tighten their budgets, protecting royalty revenues during slower economic periods.
So if you’re looking for a reliable high-yield dividend stock to buy for your RRSP, Pizza Pizza currently offers a 5.9% yield.
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