Investors of all ages are starting to realize that buying dividend stocks is a great way to build a retirement portfolio.
In the past, interest rates were high enough that you could simply buy Canadian Savings Bonds or GICs and get decent enough returns that you wouldn’t have to take on the volatility associated with equity markets.
Unfortunately, the days of high interest income are long gone and savers are now left with few options when it comes to finding investments that can provide solid yields while assuming reasonable levels of risk.
A balanced portfolio of reliable dividend-growth stocks can meet those objectives, but not everyone has the time or financial background to pour over dozens of financial reports in search of the best picks.
With this this thought in mind, here’s why I think dividend-growth investors should consider Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) and Telus Corporation (TSX:T)(NYSE:TU) as solid picks to begin a retirement portfolio.
Bank of Nova Scotia
Canada’s most international bank is betting big on growth in Latin America and investors are starting to appreciate the wisdom of that strategy.
The bank is primarily focused on Mexico, Peru, Colombia, and Chile. These countries make up the core of the Pacific Alliance, a free-trade bloc created to enable the liberal movement of products and workers among the member countries.
As businesses expand their reach into the connected markets, they need a wide variety of new banking products and services to ensure they can operate efficiently. Bank of Nova Scotia has established a strong network in the four countries and this give businesses a familiar brand to work with in all markets.
The four countries also have a combined population base of 200 million people. The growing middle class is in constant demand of lending and investing products. Bank of Nova Scotia is taking advantage of that demand.
In its Q1 2015 income statement, the bank said year-over-year commercial loan growth in Latin America hit 11% and retail loan growth was 13%. To put the opportunity in perspective, loan growth in Canada over the same time period was 4%.
Bank of Nova Scotia pays a dividend of $2.72 per share that yields about 4.2%.
Canada’s fastest growing communications company is in a sweet spot right now.
Canadian mobile providers are facing a June 3 expiration date for all three-year contracts and the market has been nervous that incentives rolled out to re-sign customers before the deadline are going to hit earnings.
That might be true in the short term, but Telus has an advantage over its peers. Many Canadians will switch providers out of frustration with the quality of service they have been getting from their supplier. Telus consistently has the most satisfied customers in the industry and boasts the lowest turnover rate in the country.
The strong customer focus should pay off in the current free-for-all for new subscribers.
Telus is also poised to benefit from next year’s changes to the rules about TV packages. Beginning in March 2016 subscribers will be given the opportunity to buy a basic $25 package that consists of regional and educational programming, and then add on the specialty channels they want to purchase on a pick-and-pay basis.
Telus has a large clientele of TV subscribers but it doesn’t own any of the content. This means it can continue to do deals with the owners of the most popular programs and specialty channels without the risks facing its peers who own media assets that might not survive the pick-and-pay process.
Telus is also branching out into high-growth areas in other sectors. Its Telus Health unit is Canada’s largest provider of secure data services targeted at doctors, hospitals, insurance companies and their clients. This market has huge growth potential and offers investors a reliable income stream that is separate from the traditional mobile and landline communications offerings.
Telus pays a dividend of $1.68 that yields about 4%. The company has increased the payout nine times in the past four years.
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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 Andrew Walker has no position in any stocks mentioned.