Create Your Own Pension Plan With These 3 Dividend Stocks

All three of these companies offer steady dividends you can count on.

| More on:
The Motley Fool

One of the nicest luxuries a retiree can have is a nice pension plan. If you’re one of the many people who don’t have one, it’s up to you to create a synthetic plan with your own savings. What’s the best way to approach this?

If you’re investing in individual stocks, the best approach is to look for secure companies that pay a nice dividend. Below we take a look at three examples.

1. TransCanada

If you’re creating your own pension plan, there’s no better place to start than the pipeline companies. These companies operate critical infrastructure with little competition, and make revenue primarily from long-term contracts. What more could a pensioner want?

At this point, TransCanada (TSX: TRP)(NYSE: TRP) is likely the best option. Canada’s second-largest pipeline operator has a dividend yield of 3.5%, not bad considering the payout has increased every year since 2000.

Better yet, the future looks very bright for TransCanada. The company has $36 billion of commercially secured projects, so even if the Keystone XL pipeline is rejected, there will still be plenty of opportunities to grow earnings. That should translate into ever-increasing dividends, perfect for your pension plan.

2. Canadian Imperial Bank of Commerce

At first, this may seem like a mistake. After all, didn’t Canadian Imperial Bank of Commerce (TSX: CM)(NYSE: CM) suffer more than any other big five bank during the crisis?

While it is true that it has made missteps in the past, including $10 billion in writedowns during the crisis, the bank has dramatically scaled back since then, focusing almost entirely on providing basic financial services to Canadians. In fact, over 90% of its net income came from Canada last year. Looking ahead, earnings look more stable than ever.

Now people are more concerned with its lack of growth prospects, but this should be of secondary concern if you’re building a pension plan. Rather, you should focus on the bank’s 4.1% dividend yield. If it decided to pay out a greater proportion of its earnings to shareholders, that dividend could take off in a hurry.

3. Power Corporation

Power Corporation (TSX: POW) is an unfamiliar name to most Canadians, but make no mistake. This is an excellent option for any synthetic pension plan.

Power Corporation is one of Canada’s most diversified businesses, with majority stakes in well-known brands like Investors Group, Mackenzie Investments, and Great-West Lifeco. It also has stakes in international businesses, including some outside of financial services. So by holding just one stock, you can get instant diversification.

Power Corp also has a fantastic track record — its stock is up nearly seven times since 1995 — and a 3.7% dividend yield. Even if you already own other financial services providers, like CIBC for example, this company would make a great addition to your pension plan.

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.

Fool contributor Benjamin Sinclair has no position in any stocks mentioned.

More on Investing

Happy family father of mother and child daughter launch a kite on nature at sunset
Investing

3 Soaring Stocks to Hold for the Next 20 Years

These three stocks are good bets for the long haul, given their healthy long-term growth prospects.

Read more »

grow dividends
Tech Stocks

Celestica Stock Is up 44% Since Earnings: What Investors Need to Know

Celestica continues to benefit from strong demand and production efficiencies, yet the stock remains undervalued.

Read more »

A plant grows from coins.
Investing

2 Dividend Stocks Paying 5% or More That Could Beat the Market in 2024 and Beyond 

Here are two top dividend stocks long-term investors may certainly want to consider for their yields and growth profiles right…

Read more »

edit Balloon shaped as a heart
Dividend Stocks

Love Value Stocks? 2 That Are Screaming Buys in May 2024

Patience can pay off by investing in these two value stocks with nice dividends and the potential to turn around.

Read more »

healthcare pharma
Tech Stocks

What’s Going on With WELL Health Stock?

WELL stock (TSX:WELL) made strong moves once again, with record earnings and even higher guidance for 2024.

Read more »

Senior Couple Walking With Pet Bulldog In Countryside
Dividend Stocks

2 Everlasting Canadian Stocks for Your RRSP

The Canadian National Railway (TSX:CNR) stock is worth owning for the long haul.

Read more »

money cash dividends
Stocks for Beginners

Is TD Stock the Best Dividend Stock for You?

Shares of TD stock (TSX:TD) plunged on the news of a money laundering probe. But could this mean it's a…

Read more »

exchange traded funds
Investing

New to Investing? Get Started With This Easy, Hands-Off Method

Vanguard S&P 500 Index ETF (CAD-hedged) (TSX:VSP) is a glorious first investment candidate for beginner investors.

Read more »