Many retirees use dividend stocks to help pay the bills.
This wasn’t always the case, but the old days of getting big interest payments from GICs and Canada Savings Bonds are long gone. As a result, income seekers have moved into riskier investments in order to get the required yield they need to make ends meet.
Pensioners want to buy safe stocks that pay growing dividends, but the equity market is volatile these days, and many of the previous favourites have gone from being dividend champs to chumps.
So, where can you get good yield without taking on too much risk?
Right now, I think income investors should consider BCE Inc. (TSX:BCE)(NYSE:BCE) and Bank of Montreal (TSX:BMO)(NYSE:BMO).
BCE
BCE has been a long-term favourite with seniors, and that trend should continue.
The company commands a dominant position in a market with few serious competitors and has the financial firepower to invest in network improvements to ensure it retains its leadership position.
BCE recently reported solid Q3 2015 results with adjusted net earnings per share rising 22% compared with the same period last year.
The company added 78,000 net new postpaid wireless subscribers and 68,000 net new IPTV customers during the three-month period. BCE also signed up 58,000 more Internet clients.
The reason for the strong results is BCE’s continued investment in state-of-the-art technology, including its fibre-to-the-home initiative.
BCE pays a quarterly dividend of $0.65 per share that yields 4.6%.
Bank of Montreal
The big Canadian banks are all good dividend-growth picks, but Bank of Montreal looks attractive right now because it is reasonably priced and offers investors nice revenue diversification.
In its fiscal Q3 earnings period, Bank of Montreal delivered profits of $1.23 billion, up 6% from the same period last year. The Canadian retail operations are still the bread and butter of the company and accounted for $557 million of the company’s earnings. Wealth management kicked in $233 million and the capital markets operations added $274 million in profits.
The U.S. group contributed $186 million, up 36% compared with Q3 2014. Bank of Montreal recently announced an agreement to purchase GE Capital’s commercial truck financing business, and that should help boost earnings in the U.S. segment going forward.
Bank of Montreal pays a quarterly dividend of $0.82 per share that yields 4.4%. The company has given investors a piece of the profits every year since 1829.
