The Motley Fool

Planning for Retirement? Here Are 3 Dividend Stocks to Up Your Income

When investing for retirement, income is the name of the game.

Studies show that retirees’ number one concern is whether they’ll have enough income to live off in retirement. With CPP payments lacking inflation-indexing, it’s not hard to see why. And although retirement planners could save money and hope their cash hoard lasts them through their golden years, it’s not a practical solution.

For savvy retirement planners, dividend stocks (and other income-generating investments) are just what the doctor ordered. Unlike CPP payments, dividend growth may outpace inflation. Unlike deposit interest, dividends can be high enough to live on. And unlike growth stocks, the best dividend stocks are safe enough for a retirement portfolio.

So, what are some great dividend stocks you can buy to up your retirement income?

I’ll start with one you’ve probably heard of.

Toronto-Dominion Bank (TSX:TD)(NYSE:TD)

TD is one of the best bank stocks in Canada, with strong earnings growth, a 30% profit margin, and a low P/E ratio of about 13. The stock is up a “so-so” 5% this year, which won’t win it any awards. But what it does have going for it is a solid dividend, which yields about 3.5% at the time of this writing. The company also has a solid history of raising its dividend: the current payout of $0.67 per quarter is up roughly 10% from last year.

Canadian National Railway (TSX:CNR)(NYSE:CNI)

CN Railway is one of Canada’s oldest companies. It may also be one of the best: it has a 42% profit margin and a 35% return on equity, along with 27% year-over-year revenue growth, all with a low P/E of about 15. CN Railway pays a dividend with a yield of about 1.55%. This isn’t an especially high yield. But what CN Railway does have is steady dividend growth: it has raised its dividend every year since 2013, and the payout has doubled since that time. If the company can keep this up, that 1.55% may turn into 3.10% in short order.


Finally, we have Fortis. Fortis is a Newfoundland-based utilities company with assets all over North and South America. The company has been having some difficulties lately, with small earnings and revenue decreases in the most recent quarter. Nevertheless, the company is priced low relative to book value, with a price-to-book ratio of 1.23. More to the point, Fortis shares pay a generous dividend with a yield of about 4.07% at the time of this writing. Fortis management also has one of the best long-term track records of dividend increases among TSX-listed companies.

Bottom line

When investing for retirement, it’s best to focus on two things: safety and income: safety, so your retirement savings don’t get wiped out; and income, so you can live off your investments without selling them. All of the stocks in this article fit both criteria.

There are also Canadian index ETFs that pay dividends if you want an even safer bet.

Our #1 Stock to Buy in 2018 (and Beyond!)

When you buy heavily cyclical stocks at low prices… and then hold the shares until the cycle reaches its peak… you can make a very healthy profit.

Every investor knows that. But many struggle to identify the best opportunities.

Except The Motley Fool may have a plan to solve that problem! Our in-house analyst team has poured thousands of hours into their proprietary research – and this is the result.

Our top advisor Iain Butler has just identified his #1 stock to buy in 2018 (and beyond).

The last time this stock went from the low point of its cycle to the peak… shares shot from $12 to $40 inside of 4 years. That’s an 300%-plus return. And if you missed out on that ride, today might just be your second chance.

Click here to claim Iain’s new report, absolutely FREE!

Fool contributor Andrew Button has no position in any of the 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.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.