Stocks to Buy — and Keep Until You’re Retired

Would-be retirees can be rid of the pressure of retirement planning by buying and holding shares of dependable dividend-payers Fortis Inc. (TSX:FTS)(NYSE:FTS) Emera Inc. (TSX:EMA).

| More on:
Senior couple at the lake having a picnic

Image source: Getty Images

Any would-be retiree is in search of ideal stock prospects he or she can hold forever. But when you ask current retirees, chances are they’re invested in Fortis Inc. (TSX:FTS)(NYSE:FTS) for the longest time already. It’s not surprising to learn too that other retirement planners are choosing Emera Inc. (TSX:EMA).

Tech stocks dominated the scene the past two years. They’re the acknowledged high-flyers, except that they’re not the kind of stocks to own when you’re retired from the mainstream. New and emerging technologies cause rapid changes in the sector. Thus, holding tech stocks for years is riskier and not advisable.

You’re free of doubt and worry when you invest in utility companies for future regular income post-retirement. Because they’re known to be high-dividend payers, you’ll get to enjoy life in the sunset years. No other investments can guarantee financial security.

A top tier regulated electric company

Fortis Inc. is nearing a decade of dividend growth. That’s tantalizing and truly alluring for folks due for retirement. The $21.9 billion regulated electric company is basically a pension provider. Don’t expect high upsides in price movements, although FTS will certainly prepare you for a healthy retirement lifestyle.

The current dividend yield is 3.6% and the company grows dividends by 6% annually. There’s no question on sustainability given the 66.6% payout ratio. Net income has been steady as a rock despite the market ups and downs.

But the real takeaway lies in the nature of the business. Fortis generates, transmits, and distributes electricity to customers in Canada, the U.S. and the Caribbean. Since revenue is derived from regulated utility rates, it’s a low-risk business. Your investment is protected from day one of your investment.

Legitimate long-term hold

Emera Inc. is in the same sector as Fortis. While the latter is a legendary dividend growth stock, this $12.2 billion Halifax-based diversified utilities company is also a legitimate investment prospect for would-be and current retirees. EMA pays a higher dividend of 4.5%, but with a higher payout ratio of 76.08%.

The company holds an impressive 12-year dividend growth streak. The dividend increases over the last three years have averaged in the double-digits. Based on the company’s guidance, dividends will grow by 4% to 5% through 2021.

Like Fortis, the bulk of earnings are sourced from regulated utility rates. Therefore, dividends are fully covered and payments are 100% guaranteed. Emera’s net income jumped 180.5% to $747 million in 2018 while posting an operating cash flow of $1.66 billion.

No red flags on the horizon

When you lay down the groundwork for retirement, you have to take calculated steps. The most important aspect is to make sure the stocks you pick don’t have red flags. Fortis has the longest history of dividend growth, but Emera is no second fiddle.

Both companies will stay the course and their stock prices would appreciate at best by 12%. The good thing is that there are alarm bells on the horizon. Dividends will flow as expected while you build your retirement fund.

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 Christopher Liew has no position in any of the stocks mentioned.

More on Energy Stocks

Group of industrial workers in a refinery - oil processing equipment and machinery
Energy Stocks

2 Energy Stocks That Could Hold Up if Oil Prices Turn

Suncor Energy (TSX:SU) and Cenovus Energy (TSX:CVE) are great energy stocks that could continue higher through 2023.

Read more »

oil tank at night
Energy Stocks

2 Sub-$3 TSX Energy Stocks I’d Buy in 2023

Here are two under-$3 TSX energy stocks you can buy in 2023 and hold for the long term.

Read more »

A bull and bear face off.
Energy Stocks

2 Top TSX Energy Stocks to Buy as Crude Oil Is Set to Soar Higher

TSX energy stocks might keep topping charts in 2023 as well.

Read more »

Oil pumps against sunset
Energy Stocks

Is the Oil Boom Over?

The energy boom is over but dividend stocks like ARC Resources (TSX:ARX) are still attractive.

Read more »

Road signs rerouting traffic
Energy Stocks

2 High-Yield Energy Stocks I’d Buy and 1 I’d Avoid

I would buy energy stocks like Enbridge Inc (TSX:ENB) this year.

Read more »

tsx today
Energy Stocks

TSX Today: What to Watch for in Stocks on Friday, January 27

The TSX Composite is on track to close the fourth consecutive week on a positive note.

Read more »

Solar panels and windmills
Energy Stocks

Algonquin Stock Has Broken Investors’ Hearts, but I Think It Will Turn a Corner

AQN stock faces more uncertainty in 2023, but could be a compelling value pickup for income investors.

Read more »

energy industry
Energy Stocks

2 Top Energy Stocks to Buy Right Now

These energy companies remain immune to the economic and commodity down cycles.

Read more »