Nothing beats a TFSA that churns out loads of predictable income. Such an investment vehicle might be the perfect way to save for retirement.
An investor who patiently adds $6,000 to their TFSA each and every year will end up with a formidable amount of capital over 30 or 40 years. A TFSA or $1 million, $2 million, or even more is very possible.
Let’s assume you end up with a $1.5 million TFSA 30 years from now. At just a 4% yield, this portfolio will churn out $60,000 each year in tax-free income. Inflation will ensure this income stream isn’t worth as much as it is today, but it’ll still be a nice start towards a luxurious retirement.
And remember, TFSA withdrawals don’t count as active income, which means a retiree would also collect generous government programs designed for low income seniors.
If a 4% yield is great, then a 6% yield is even better. Generous dividends can even help during the accumulation phase of a portfolio’s life. They offer plenty of cash flow today that can be reinvested into other income-producing assets.
Here are three great dividend stocks to get you started, all companies that pay more than 6% annual dividends.
Rogers Sugar
There are very few businesses less sexy than sugar, which is exactly why investors should love Rogers Sugar (TSX:RSI). It’s steady and boring, delivering predictable cash flows year after year.
The company’s expansion efforts into maple syrup have hit a bit of a snag, with profits from that division down on a year-over-year basis. Management has also announced the company will further invest into its maple syrup division, and it expects lower profits to continue over the short term as it deals with a new competitor in the space.
This weakness has impacted the stock, which is down nearly 10% since the beginning of August.
While any decline in the share price is bad news for current shareholders, it’s great news for those looking to take a new position in the stock. The sell-off has increased the company’s dividend to 6.9%. This represents the highest yield offered by the stock in the last year.
The payout is secure, and there’s some capital appreciation potential over time. What more could an income investor want?
Northview Apartment
Northview Apartment REIT (TSX:NVU.UN) is my favourite residential REIT for a few different reasons.
First of all, I like the trust’s exposure to more non-traditional markets. It gets a big chunk of its net income from areas like Atlantic Canada and the northern territories. There’s less competition in these areas, which translates into nice long-term returns.
The company also has a solid three-pronged approach to growth. It acquires existing apartments, usually newer buildings just completed. It also builds new units, investing more than $100 million into new projects in 2019 alone. And finally, Northview has also been renovating existing units and charging higher rents. These projects are adding to the REIT’s bottom line nicely.
Investors are getting all of this for a valuation far cheaper than its peers. Northview shares trade at approximately 15 times trailing adjusted funds from operations (AFFO). Its competitors trade between 20 and 25 times trailing AFFO.
Northview’s yield is right at 6%.
Capital Power
If you thought Northview REIT was cheap, then you’re going to love Capital Power (TSX:CPX).
Capital Power is the owner of 6,300 MW of installed and upcoming energy production potential, which makes it a major player across North America. You might remember the company having a lot of exposure to coal-fired power in Alberta, but that becomes less and less important as Capital Power continues to grow.
The stock is incredibly cheap. Management estimates the company will earn $4.46 per share in normalized AFFO in 2019. Shares trade at less than $30 each as I write this. That puts the stock at under seven times forward AFFO. That’s a ridiculously cheap multiple.
This means Capital Power can pay out a generous 6.5% dividend and still have plenty of cash flow left over to make acquisitions and help pay for eventually converting its coal-fired power plants to natural gas.
