US Stocks do not receive the dividend tax credit, and US dividend income is fully taxed unregistered or in a TFSA. So holding US Stocks inside your RRSP makes good sense. Some of the big US blue chips also pay reasonable dividends of 3.00% or more, are deemed safer than the US Dollar, and raise their dividends annually. In addition the dividend yield on these blue chips is higher than the current rate for GIC’s and government bonds.
I’ve picked three of the Dividend Cadillacs for US Stocks. You’re not going to get a huge capital gain on these companies, and you will be lucky to see 10% growth or more per year. Nor are you going to get a bargain. But you won’t be laying awake at night either wondering if you should have bought a safer stock. While US Banks are on the verge of collapsing, US Blue Chips are proving to be pillars of the US economy. Since September these stocks are on their way up, so if you have the funds US Blue Chips are worth considering:
Here in Canada when you need building supplies forget Rona, Home Depot (HD) is the place to go. Their customer service needs much improvement, but most of their products are well priced – even the contractors go there. Home Depot was a bargain at $28.00 US last month, and is currently trading at $31.68 US, but it still represents good value. The PE Ratio is a little steep at 17.41, but the Liability to Equity ratio is low at 1.19. Home Depot has a dividend yield of 3.00% and a Return On Equity of over 15%. I think its a good buy.
What can you say ? McDonald’s Corp (MCD) is the King of the fast food industry in America and globally as well. One thing about McDonald’s though, is you won’t buy it for a bargain. The stock always seems to be trading at its 52 week highs. But the growth prospects for McDonald’s are always good because it does well regardless of the global economy. McDonald’s has a PE Ratio of 17.1, a Liability to Equity ratio of 1.18, and an outstanding return on equity over 35%. The dividend yield is currently 3.30%, and McDonald’s is currently trading at $74.51 US per share. Not a bargain, but you will make good returns by holding for the long term. I wouldn’t be surprised to see McDonald’s hit $100 US per share within two years.
Johnson & Johnson (JNJ) is another US blue chip giant, that rewards its share holders who hold on for the long term. The company is well known for its international manufacture and sale of a broad range of products in the health care and pharmaceutical industry. It has a PE Ratio of 13.11, a very low Liability to Equity of 0.75, and another phenomenal Return on Equity of 25.5%. That low Liability to Equity is reason enough to purchase. But Johnson & Johnson also has a current dividend yield of 3.50%. Last month J&J was trading below $58.00 US per share and has already moved up to $62 US. I think there is a small correction for the stock, and its a buy at $60 US.