When it comes to retirement, Canada has a couple of pension plans to ensure a steady stream of income for retirees. The Canada Pension Plan (CPP) and the Old Age Security (OAS) are two such retirement benefits for Canadians.
Anyone over the age of 60 with at least a single valid contribution to the CPP can avail benefits. Comparatively, the OAS is available to Canadians who have stayed in the country for at least 10 years.
The maximum payout amount after combining the CPP and OAS is $1,789.36, while the average payout stands at $979.63. This is hardly sufficient to lead a decent retirement life in large Canadian cities.
So, retirees need to create another income stream to ensure a comfortable retirement life. This can be achieved by disciplined long-term investing. High-yield dividend stocks or ETFs provide investors with an option to grow wealth over the long term.
You can look at investing in iShares S&P/TSX Canadian Dividend Aristocrats Index ETF. The CDZ has a diversified exposure to dividend-paying Canadian stocks across industries. This index screens Canadian companies that have increased cash dividends over the last five years, which helps investors earn a regular dividend income.
In the last year, the CDZ has gained 19.4%, while the ETF has returned 8.9% in the last 10 years. As banking and energy are two major sectors in Canada, they account for 25.2% and 15.4% of this ETF, respectively. The top three holdings of the CDZ include the following stocks:
Alaris Royalty
Shares of Alaris Royalty have returned 21.4% in the last year. The stock has a forward price-to-earnings multiple of 12.7, and analysts expect the company’s earnings to grow at a rate of 8% in the next five years. After accounting for its dividend yield of 7.1%, we can see that Alaris is trading at a cheap valuation and can move higher in 2020.
Alaris is a Canada-based company that provides capital to private businesses. It is an equity capital provider for growth companies and is expected to increase sales by 16.7% in $116.8 million in 2019 and 7.5% to $125.5 million in 2020.
Inter Pipeline
Shares of Inter Pipeline (TSX:IPL) have returned 0.2% in the last year. The stock has a forward price-to-earnings multiple of 21.4 and a dividend yield of 7.9%. IPL stock has lost 36% in the last five years due to the weak energy sector and falling oil prices in Canada.
IPL is a major player in the midstream energy space with a portfolio of oil sands pipelines, conventional oil pipelines, and natural gas liquids processing facilities. It also owns a bulk storage business in Europe with terminals located in several regions across the continent.
IPL continues to invest heavily in capital expenditures. It is building a $3.5 billion polypropylene plant to turn propane into raw materials plastics. There are concerns over the company’s massive debt balance of $6.5 billion, but with operating cash flows of $884.6 million, investors have enough breathing space.
Fiera Capital
Shares of Fiera Capital (TSX: FSZ) have returned 7.8% in the last year. The stock has a forward price-to-earnings multiple of 8.7, and analysts expect company earnings to grow at a rate of 15.3% in the next five years. After accounting for its tasty dividend yield of 6.5%, we can see that Fiera is one of the most undervalued stocks on the TSX.
Fiera Capital is an investment advisory company. The stock has underperformed markets, despite stellar growth over the years. Fiera has increased sales from $344 million in 2016 to $540 million in 2018. Analysts expect sales to reach $646 million in 2019 and $774 million in 2021. Comparatively, analysts expect EBITDA to increase from $107 million in 2016 to $245 million in 2021.
Despite this growth, Fiera shares have lost over 6% in the last five years. High-dividend-yielding stocks generally trade at a cheap valuation, and investors can benefit from capital appreciation as well. This is an ideal way to complement your OAS and CPP payments in retirement.
