Attention Retirees: 5 Dividend Stocks for Retirement Income

Dividend stocks like Royal Bank of Canada (TSX:RY)(NYSE:RY), Toronto-Dominion Bank (TSX:TD)(NYSE:TD), and Canadian National Railway Company (TSX:CNR)(NYSE:CNI) deserve a spot in any retiree’s portfolio.

| More on:
The Motley Fool

Fewer and fewer people are enrolled in employer-sponsored pensions, and that’s creating a major challenge for Canadians approaching retirement age.

Fixed-income assets are a good substitute. However, a retirement portfolio containing only securities like bonds and GICs may not generate sufficient cash flow. Even worse, the purchasing power of fixed income does not always keep pace with inflation.

That’s why adding a few dividend stocks to a retirement portfolio makes so much sense. They provide ongoing income. Their payouts tend to rise faster than inflation over time. Furthermore, eligible Canadian dividends are taxed at a lower rate than interest income.

But with so many stocks out there, where do you begin? My advice is stick to the tried and true. Think banks, railroads, pipelines, and telecommunications. If the company sells a product that is easily explained to the grandkids, that’s a plus.

Here are five dependable dividend payers to get you started.


Current Yield

Market Cap

Royal Bank of Canada 3.9% $115.0 billion
Toronto-Dominion Bank 3.7% $102.7 billion
Canadian National Railway Company 1.7% $60.0 billion
Enbridge Inc. 3.1% $51.8 billion
BCE Inc. 4.8% $45.6 billion

Source: Yahoo! Finance

Let’s say a few words about these companies.

The Royal Bank of Canada (TSX:RY)(NYSE:RY) and the Toronto-Dominion Bank (TSX:TD)(NYSE:TD) both churn out some of the highest yields around. They’re both also looked down upon because everyone knows future earnings growth will be meager at best. The banking industry matured years ago and most consumers aren’t in the position to take on more debt.

That said, Canadian banks are almost the definition of a wonderful business. High barriers to entry prevent new competitors from eating into margins. Limited growth prospects means the banks pass on most of their income to shareholders. And with a yield this high, investors who patiently reinvest their dividends will beat most others as the years tick by.

The story is easy to wrap your head around at Enbridge Inc. (TSX:ENB)(NYSE:ENB): It’s a well-run utility and pipeline company serving millions of customers in Central Canada. Customers heat their homes, you get a dividend—and that’s a dividend that hasn’t been cut in the past 62 years.

The Canadian National Railway Company (TSX:CNR)(NYSE:CNI) is easy to disregard because of the stock’s tiny yield, but that would be a mistake. In addition to paying a regular dividend, CN also buys back boatloads of its own shares. If you were to include share buybacks in the stock’s yield, this name would pay out nearly 5%!

Finally, BCE Inc.’s (TSX:BCE)(NYSE:BCE) story hasn’t changed in years: telecom companies own a lucrative oligopoly, but the threat of a fourth carrier hovers overhead. What also hasn’t changed is that investors who realize the competition threat is largely overblown are being rewarded with piles upon piles of money. It has never paid to bet against Canada’s Big Three telecom companies, and there’s little reason to assume that will change.

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 Robert Baillieul has no position in any stocks mentioned. David Gardner owns shares of Canadian National Railway. The Motley Fool owns shares of Canadian National Railway. Canadian National Railway is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

Path to retirement
Dividend Stocks

Retirement Wealth: 2 Top Dividend Stocks for TFSA Investors

Parking a sizable portion of your savings in reliable dividend stocks is a time-tested wealth-building strategy appropriate for a wide…

Read more »

Senior Couple Walking With Pet Bulldog In Countryside
Dividend Stocks

CPP Disability Benefits: Are You Eligible?

Fortis Inc (TSX:FTS) stock could provide you with passive income if you can't get CPP disability benefits.

Read more »

data analytics, chart and graph icons with female hands typing on laptop in background
Dividend Stocks

2 of the Best Canadian Dividend Stocks to Buy in September 2023

These two of the best Canadian stocks could help you receive dividend income, even in difficult economic environments.

Read more »

Canadian Dollars
Dividend Stocks

TFSA Passive Income: 3 Amazing Stocks That Earn $1,600/Year

Are you looking how to earn $1,600 a year tax-free? These three Canadian stocks are a good bet for passive…

Read more »

Dollar symbol and Canadian flag on keyboard
Dividend Stocks

2 Great Canadian Dividend Stocks to Buy Now for High Yields

TC Energy and Bank of Nova Scotia are good examples of top TSX stocks paying attractive dividends that should continue…

Read more »

Man considering whether to sell or buy
Dividend Stocks

DND Stock: Buy, Sell, or Hold?

DND stock (TSX:DND) fell by 17% after producing earnings that once again fell below analyst estimates. But does that mean…

Read more »

question marks written reminders tickets
Dividend Stocks

SNC Stock Changes Name, But Is it Enough?

SNC (TSX:SNC) stock made it official and is breaking from the past, rebranding with a new name. But is it…

Read more »

Close up shot of senior couple holding hand. Loving couple sitting together and holding hands. Focus on hands.
Dividend Stocks

TFSA: How Retirees Can Generate $2,400 Per Year in Passive Income

This investing strategy reduces risk while generating great yields.

Read more »