The Motley Fool

Retirees: 2 Top Dividend Stocks to Average a 5% Yield in Your TFSA

Canadian retirees are trying to find decent yield in a world where GICs and savings accounts no longer offer acceptable returns.

Let’s take a look BCE Inc. (TSX:BCE)(NYSE:BCE) and Inter Pipeline Ltd. (TSX:IPL) to see why they might be attractive picks.

BCE

BCE has long been a favourite with pensioners, and there is little reason for that to change.

The company holds a dominant position in an industry with few serious competitors, and there is little risk of a major new entrant coming in to spoil the party.

Consumers complain about it, and once in a while the government pretends to do something about it, but the situation is unlikely to change, and that’s a good thing for BCE’s investors.

The company has expanded its reach in recent years and now owns sports teams, radio stations, a television network, specialty channels, and retail outlets. When you combine these assets with the world-class wireline and wireless networks, you get a powerful business that pretty much has its fingers in the Canadian communications pie at every point of interaction with the public.

Critics say the stock is expensive by historical standards, and they are right, but investors have very few places to turn for quality yield that is safe, and the era of ultra-low interest rates isn’t going to go away anytime soon.

I wouldn’t own it for share-price growth, but BCE still remains one of the best picks in the Canadian market for above-average dividends. Investors who buy today can pick up a yield of 4.5%.

Inter Pipeline

Inter Pipeline lies in the shadows of its larger infrastructure peers, but the company’s balanced revenue stream makes it an interesting pick in the broader energy space.

Inter Pipeline owns oil sands infrastructure, conventional oil pipelines, natural gas liquids (NGL) extraction facilities, and a European liquids storage business.

All four business segments delivered improved year-over-year funds from operations (FFO) in the second quarter, and management is taking advantage of the weak market conditions to invest for the future.

What’s the scoop?

The company recently agreed to purchase two NGL extraction facilities and related infrastructure for $1.35 billion from The Williams Companies. Inter Pipeline is getting the assets at a 45% discount to the construction cost, so there is an opportunity to generate strong returns on the investment once energy prices recover.

Inter Pipeline raised its dividend last November to $0.13 per share. That’s good for a yield of 5.6% today, and investors could see another hike once the new assets are integrated into the portfolio.

The bottom line

An equal investment in both BCE and Inter Pipeline will generate an average 5% yield in your TFSA at the current dividend rates. Both payouts look sustainable and should increase at a regular clip going forward.

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

Fool contributor Andrew Walker has no position in any stocks mentioned.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.