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Canadian Pensioners: 3 Dividend Stocks to Supplement an OAS Pension

Can you retire comfortably on just OAS pension payments and zero money in the bank? There’s no one-size-fits-all answer to the question, as it depends on where you live, your expected expenses, your marital status, and your taxable income.

For Canadians living in a pricey like Vancouver, the answer is not just chance regardless of the other variables, given that the maximum monthly payment amounts are unlikely to cover the insanely high costs of living without some sort of additional income supplementation.

If you’ve got a nest egg saved up, you can (and should) supplement your pension payments by turning it into an income stream rather than cracking it open and spending the principal. And to avoid triggering any OAS clawbacks, one should keep such an income stream in a tax-sheltered account like the TFSA.

Here are three top dividend stocks that appear to be a great value at today’s levels:

Enbridge

Enbridge (TSX:ENB)(NYSE:ENB) is a dividend darling that could soon regain its former status. The pipeline behemoth has suffered its fair share of setbacks over the years that followed the 2014 oil plunge, but despite the headwinds, management has continued to hike its dividend.

The stock has been picking up momentum over the past few months, and although you’ll get a smaller yield (5.8% at the time of writing) at a higher price compared to several months ago — when I pounded the table on the stock — I still think Enbridge’s best days are ahead of it given recent improvements and the fact that reliable dividend growers like Enbridge deserve a more premium multiple.

Shares still look undervalued at 13.6 times EV/EBITDA and 1.8 times book. If you’re in the market for a gift that keeps on giving, it’s tough to match Enbridge, even after its recent rally.

TD Bank

I’ve often referred to TD Bank (TSX:TD)(NYSE:TD) as the crème de la crème of the Canadian banks. You’re getting excellent managers that are all about scoring the highest degree of risk-adjusted growth.

TD Bank has outshone many of its peers over the years for its “premium” lower volatility revenue mix, and despite the higher degree of perceived safety, the bank hasn’t compromised on the return front.

We’re in the midst of a nasty Canadian credit downturn, and many analysts are not expecting much going into 2020. Last year, we witnessed common negative themes across the board.

Despite the growth-stunting headwinds common to all Canadian banks, I viewed TD Bank as one of the few swimmers that were still wearing trunks (in case you’re wondering, CIBC apparently forgot its shorts on shore!) when the tide started going out.

2020 is going to be another challenging year for bank investors, but those with a long-term horizon will do relatively well by buying TD Bank and collecting its growing 4%-yielding dividend, as they wait for credit conditions to normalize.

The stock is also pretty darn cheap at 10.7 times next year’s earnings, so for the income-oriented, it’s tough to pass on the name in spite of the gloomy industry outlook.

Fortis

No list of dividend stocks aimed at retirees is complete without Fortis (TSX:FTS)(NYSE:FTS). Yes, it’s a go-to stock for defensive dividends, and while the stock is already widely owned, I still think it’s worthwhile to form your income stream’s foundation with a stock that I believe is the “safest” bond proxy on the TSX Index.

Unlike the banks, however, the utilities have been roaring over the last year, as the hunt for safe yields grows tougher by the day. As a result, Fortis’s dividend is yielding just 3.34%, and while you could score a much higher yielder elsewhere, it’s important to remember why investors settle with the smaller yield.

Fortis offers a degree of safety like few other stocks out there. Fortis is highly regulated, leaving little in the room for downside surprises.

That means that Fortis will buoy your portfolio come the next market crash and almost guarantee you a solid risk-adjusted return over the long term. Boring, I know, but for retirees, boring is beautiful, and it doesn’t get more boring or beautiful than Fortis stock at this juncture.

Stay hungry. Stay Foolish.

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Fool contributor Joey Frenette owns shares of FORTIS INC and TORONTO-DOMINION BANK. The Motley Fool owns shares of and recommends Enbridge.

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