Dividend Investors: 1 Top Stock to Start Your Retirement Income Fund

BCE (TSX:BCE) provides a 5.7% dividend yield. Should you buy the stock now?

| More on:
Various Canadian dollars in gray pants pocket

Image source: Getty Images

Canadian pensioners and other income investors are searching for ways to boost the returns they get on their savings.

The good old days of generating decent income from a high-yield savings account or GICs are gone and unlikely to return in the next few years. Most bank accounts now pay little or no interest. GIC rates from the big Canadian banks briefly hit 3.5% in the fall of 2018, but have since plunged to below 2%.

This means quality dividend stocks and are really the only game in town.

Best dividend stocks

The market crash in March served as a painful reminder that stocks carry risks.

What we have seen in the past two months, however, is that top-quality dividend payers with reliable and growing distributions tend to recover quickly. These companies generally have low betas, meaning that they tend to be less volatile than the broader market. In addition, the best stocks have the ability to ride out the recession.

Let’s take a look at one stock that might be an interesting pick right now for a TFSA retirement income fund.


The pandemic lockdown has mixed implications for BCE (TSX:BCE) (NYSE:BCE). On the retail side, the company’s stores located in shopping malls across the country have not been open for phone and electronics customers to test out new products.

In addition, BCE is part owner of Maple Leaf Sports and Entertainment — home to the Maple Leafs, Raptors, Argos, and Toronto FC.

The shutdown of the NHL and NBA is ongoing and a return to play in arenas full of fans won’t likely happen until 2021.

The television network, radio stations, and BCE’s advertising company are also impacted. Businesses have pulled back on ad spending to protect cash as they try to ride out the lockdowns, which should improve heading into 2021.

BCE’s world-class wireless, TV, and internet businesses are showing their value. People are working from home and might continue to do so even if they have the option to return to offices later in the year.

Plan upgrades and new subscriptions for movie streaming and other services should get a nice lift as a result, and customers might maintain the new services as we enter the new normal.

A drop in new customer installations during the worst months of the lockdowns could lead to a rebound later in the year, although the annual boost from university students might not occur.


BCE reported a 4% increase in adjusted net earnings for Q1 2020 — which is decent in an environment where many companies saw revenue completely collapse in March.

The company generates solid free cash flow to cover the dividend and the planned capital expenditures. In addition, BCE has the power to raise prices when it needs extra cash.

The communications giant had $3.2 billion in liquidity at the end of Q1 and continues to maintain a strong balance sheet. A recently announced deal to sell 25 data centres for $1.04 billion in cash provides additional stability and funding to meet capital requirements.

BCE trades at $58.50 per share and offers a dividend yield of 5.7%. The board raised the distribution by 5% in 2020, maintaining the long track record of reliable dividend growth. Once the media businesses see revenue improve, investors could push the stock back toward the 12-month high near $65.

The bottom line

BCE’s dividend should be very safe, and investors could even see another increase in the first half of 2021 if the economic recovery arrives as expected.

If you’re searching for a sleep-easy stock to add to your income portfolio, BCE deserves to be on your radar right now.

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 Andrew Walker owns shares of BCE.

More on Dividend Stocks

Gas pipelines
Dividend Stocks

3 Stocks for High-Yield Income Each Month

Are you seeking passive income? Consider investing in these high-yield TSX dividend stocks now.

Read more »

edit Colleagues chat over ketchup chips
Dividend Stocks

2 Dividend Stocks for Beginner Investors in March 2023

Are you a new investor looking for great dividend stocks to buy? Here are two top picks!

Read more »

Hour glass and calendar concept for time slipping away for important appointment date, schedule and deadline
Dividend Stocks

Need $500 in Passive Income Each Month? These 2 TSX Stocks Are Your Top Bets

You can create a robust monthly dividend income portfolio around SmartCentres REIT, and another top passive income play today.

Read more »

A worker gives a business presentation.
Dividend Stocks

2 TSX Dividend Stocks to Buy Today and Hold for the Next 5 Years

These TSX industry leaders look cheap today and pay attractive dividends that should continue to grow.

Read more »

edit Real Estate Investment Trust REIT on double exsposure business background.
Dividend Stocks

3 Dividend Stocks to Buy Before the End of March

These dividend stocks all have earnings coming up that could see share prices rise higher, so get in on a…

Read more »

grow dividends
Dividend Stocks

5 Canadian Dividend Stocks With Yields of 5% or More

Here are five of the best dividend stocks Canadian investors can buy to boost their passive income in the current…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

Looking for $200/Month in Alternative Income? Buy 2,000 Shares of This Stock

Here’s a renewable energy-focused monthly dividend stock you can buy now to create a reliable source of alternative income in…

Read more »

Dividend Stocks

Why I Continue Buying Shares of This Magnificent Dividend Stock Hand Over Fist

This glorious dividend stock is a buy in all market situations. It not only gives you market returns but also…

Read more »