The Motley Fool

Retirees: Boost Your CPP With Dividend-Paying Stocks

Image source: Getty Images

The Canada Pension Plan (CPP) is a retirement pension, or a monthly taxable benefit, that aims to replace part of your income on retirement. If you qualify for CPP payments, you will receive retirement pension for the rest of your life.

In order to qualify for this payout, you need to be at least 60 years old. You must also have one valid contribution to the CPP. The CPP amount you receive every month will depend on several factors. This includes average earnings, the age you decide to start CPP payouts, and contributions to the pension account.

While the standard age to start CPP payouts is 65, you can receive them at the age of 60 or as late as 70. You will receive a larger payout if you delay these payments. In 2019, the maximum monthly amount you could receive as a new recipient of a pension at the age of 65 is $1,154.58. The average monthly amount is $679.16.

We can see that the CPP payout is not enough to lead a comfortable life in large Canadian provinces. Canadians need to ensure they have multiple income streams to supplement pension payments.

Invest in this ETF to boost the CPP payout

One way to ensure a predictable revenue stream is by investing in high-quality dividend-paying stocks. Canadians can look to invest in iShares S&P/TSX Canadian Dividend Aristocrats Index ETF (TSX:CDZ).

The CDZ has diversified exposure to dividend-paying, Canadian companies. All companies that are part of this ETF have increased cash dividends every year in the last five years.

The largest holding of CDZ is TransAlta Renewables. This stock accounts for 2.5% of the CDZ and has a forward yield of 6.5%. The company owns, develops, and operates renewable power-generation facilities. TransAlta Renewables is somewhat immune to the COVID-19 pandemic, and the recent sell-off should be viewed as a buying opportunity.

Fiera Capital accounts for 2.3% of the CDZ. The stock has a dividend yield of 9.3%. Fiera Capital is in the asset management space, and the stock has been pummeled in recent times. The COVID-19 pandemic-led sell-off would have seen massive withdrawals by clients. Fiera stock currently trades at $9, which is 35% below the 52-week high.

CDZ’s third-largest holding is Canada’s energy giant Enbridge. The drastic fall in oil prices and lower demand have contributed to the decline in Enbridge stock. Enbridge accounts for 2.3% of CDZ and has a forward yield of 7.7%. Enbridge is one of the largest energy pipelines in the world.

It has a robust transportation network and generates a significant amount of EBITDA via long-term contracts. This means Enbridge will not be impacted by lower commodity prices. However, as oil producers cut production and temporarily halt the transportation of energy products, Enbridge stock may remain volatile in 2020.

The Foolish takeaway

If you invest $10,000 each in these three companies, the annual dividend payouts will be around $2,350. Alternatively, if you consider investing $100,000 in the CDZ ETF, you can generate $5,680 in annual dividend payments, considering its forward yield of 5.68%.

Looking for the Next Potential Netflix? We’ve Got You Covered with These 3 Free Stock Picks

Motley Fool Canada's market-beating team has just released a new FREE report that gives our three recommendations for the Next Gen Revolution.
Click on the link below for our stock recommendations that we believe could battle Netflix for entertainment dominance.

Click Here to Get Your Free Report Today!

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.

The Motley Fool owns shares of and recommends Enbridge. Fool contributor Aditya Raghunath has no position in any of the stocks mentioned.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.