Rising interest rates are finally providing Canadian retirees with an opportunity to get some better returns from GICs, but rates are still a long way off the historical norms.
As a result, the search for yield continues, and that means dividend stocks have a roll to play, especially in taxable accounts where investors can benefit from the dividend tax credit.
Power financial is a holding company with interests in insurance and wealth management businesses in Canada, including IGM Financial and Great West Lifeco. These companies, in turn, own a broad portfolio of additional businesses in the sector. The attraction here is that you get exposure to a number of players in the financial segment through one stock.
Power Financial is also part owner of Europe-based Pargesa, which has equity positions in a number of top global businesses. Pernod Ricard, Adidas, and Total are just a few of the big ones.
Finally, Power Financial owns a significant position in Wealthsimple, which is the new Canadian financial company that targets young investors.
With interest rates moving higher, the insurance and asset management holdings should thrive. On top of that, a strengthening global economy bodes well for the Pargesa positions.
Dividend growth resumed in 2015 and is trending about 5% per year. At the time of writing, the stock provides a yield of 5.5%.
Shaw is working through a strategic transition. The company bought Wind Mobile two years ago and renamed it Freedom Mobile. Shaw continues to invest in network upgrades and is making good headway in its bid to be a fourth major competitor in the Canadian wireless market. In the most recent quarter, wireless service revenue jumped 27% compared to the previous year, and Shaw added more than 54,000 net postpaid wireless subscribers.
The addition of a strong mobile business should help Shaw compete with its peers for customers who are looking for bundled TV, internet, and wireless packages. Data demand is increasing across wireline and wireless technologies, and that bodes well for revenue growth in the coming years.
Shaw pays its dividend monthly, which is nice for retirees looking to get additional income on a regular schedule. Once Shaw completes the largest part of the required investments to bulk up the wireless network, investors should see a return to dividend growth. In the meantime, you pick up a solid 4.3% yield.
The bottom line
Power Financial and Shaw Communications pay attractive dividends that can help pensioners boost their retirement income. The stocks trade at reasonable prices and offer solid upside potential in the coming years.
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 stock mentioned.