Investing in dividend stocks is a proven way to save for retirement. Companies that pay regular dividends help aggressive savers to multiply their wealth quickly, as they re-invest their income back into the portfolio and reap the benefits of compounding.
If you are young and can spare a good chunk of your income for your retirement, you are in an ideal position to build a million-dollar retirement portfolio that’s big enough for you to enjoy your golden years.
Young savers have a fantastic saving tool, which has been designed to help maximize savings and get you the best tax benefits.
The Tax-Free Saving Account (TFSA) has many advantages for young savers. It allows investments to compound tax free, and you can cash out your TFSA without incurring a tax liability.
Through your TFSA, you can start investing in safe dividend stocks that you plan to buy and hold for a long time.
Here are some of the top dividend-paying stocks available to Canadian investors that could help make your investments grow fast.
Power and gas utilities are among the top dividend-paying companies in Canada. And in this space, I like Enbridge Inc. (TSX:ENB)(NYSE:ENB) and Brookfield Infrastructure Partners L.P. (TSX:BIP.UN)(NYSE:BIP).
Both of these companies are involved in building global energy infrastructure in diversified jurisdictions.
Their revenues mostly come from long-term contracts which provide stability and growth to their income. This is what retirees need, because they are not interested in short-term gains.
Instead, retirees want a long-term track record of paying dividends and growing them over time. Investors who’d bought Brookfield stocks in 2009, for example, have seen their $15,000 grown to ~$70,000 today.
Canadian financial institutions are another avenue to earn stable dividend income on your dividend portfolio. Canadian lenders have a strong local presence and expanding global footprint. This combination helps them to pay hefty dividends to their shareholders.
Canadian banks distribute 40-50% of their income, on average, in dividends — a very strong incentive for retirees to keep invested.
Toronto-Dominion Bank (TSX:TD)(NYSE:TD), for example, is one of the best stocks among large Canadian lenders. TD has become an eighth-largest U.S. bank through its acquisitions. With a dominant market share in Canada, it is well positioned to grow its payout.
In the past 15 years, the lender has provided a 12% annualized total return. And $10,000 invested in TD is now worth more than $30,000.
I also like having a couple of top telecom stocks due to their consistent history of paying dividends. BCE Inc. (TSX:BCE)(NYSE:BCE), Canada’s largest telecom operator, has been sending dividend cheques to income investors and retirees for more than a century.