When it comes to retirement investing — whether you’re buying stocks to add to a Registered Retirement Savings Plan (RRSP) or packing out a Tax-Free Savings Account (TFSA) — it helps to have a thesis. No matter if you’re a retiree or a young portfolio owner looking ahead, buying shares for a comfortable retirement should follow a set of rules.
There are three broad themes for retirement investing when it comes to equities. Investors can buy rich-yielding dividend stocks for years of unworried passive income.
Conversely, capital appreciation may be more appealing; investors with narrower financial horizons may thereby chose short-term momentum stocks. A third retirement investment thesis blends the two for a mix of dividends and growth.
The reliable, rich-yielding stock pick
Enbridge (TSX:ENB)(NYSE:ENB) is not without its issues. This year saw the brief – albeit alarming – collapse of oil prices. While a lukewarm recovery has since been forthcoming, the oil stock thesis is weakening. That extends to midstreamers, as well. But the Canadian energy sector went from worrisome pipelines to rallying lifelines overnight when Warren Buffett came out batting for natural gas.
Enbridge is weighted about 40% by gas revenue. As such, the news that Berkshire Hathaway was snapping up the natural gas assets of Dominion Energy improves Enbridge’s standing. Its yield is also attractively plump, weighing in at a tasty 8%.
As one of the widest moats on the TSX, dividends are unlikely to be cut. Investors can add other rich-yielding stocks, such as Brookfield Property Partners, to diversify.
The dividends-plus-growth strategy
While rich yields may appeal to investors with narrow financial horizons, growth might be equally important. Names like Barrick Gold are largely recession-proof, offering stable returns regardless of the current market conditions.
Barrick is also defensive asset-wise, with metals diversification – such as copper – further lowering the risk to investors. A small 1% dividend blends well with steep positive momentum – see 71% year-on-year gains.
Alternatively, an investor can pick names based on growth alone. The growth stock path to retirement riches might makes use of opportunities in names like Viemed Healthcare (TSX:VMD)(NASDAQ:VMD). This is the go-to stock for investors seeking a pure-play on services and equipment targeting respiratory ailments.
To illustrate just how apt this name is for the pandemic market, consider its three-month gains of 91.6%. And it could run for much longer.
As environmental damage continues to disrupt ecosystems, novel zoonotic respiratory disease outbreaks are likely to recur, which makes Viemed an ideal stock to hold for the long-term in a healthcare segment of a portfolio. This isn’t a cheap stock. But that is to be expected in a market characterized by a respiratory disease pandemic. However, this name has been growing for years and isn’t likely to stop soon.
While names like Barrick offer the potential for both share price appreciation and passive income, Viemed is a standard play for stock market growth.
Alternatively, investors with time constraints may wish to pack Enbridge shares in a retirement vehicle for juicy yields fed by wide-moat energy operations.
Buying quality stocks for retirement? The following report could significantly improve your portfolio.
Renowned Canadian investor Iain Butler just named 10 stocks for Canadians to buy TODAY. So if you’re tired of reading about other people getting rich in the stock market, this might be a good day for you.
Because Motley Fool Canada is offering a full 65% off the list price of their top stock-picking service, plus a complete membership fee back guarantee on what you pay for the service. Simply click here to discover how you can take advantage of this.
Fool contributor Victoria Hetherington has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares), Enbridge, and Viemed Healthcare Inc. The Motley Fool recommends Dominion Energy, Inc and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short September 2020 $200 calls on Berkshire Hathaway (B shares).