Dividend stocks can provide retirees with a great source of predictable cash flow. While you would want to save as much as possible to lead a comfortable life in retirement, it is always good to have a passive income stream to supplement your retirement pensions. Here we take a look at three quality dividend stocks that offer generous dividend payouts.
An energy infrastructure giant
The stock has taken a beating in the first half of 2020 due to falling crude oil prices and the COVID-19 pandemic. Enbridge stock is trading at $40.2, which is 30% below its 52-week high. This pullback has increased its dividend yield to a tasty 8.1%.
However, Enbridge is one of the top picks in the energy sector due to its low-risk business model and relative immunity to commodity prices. The company does not expect lower crude oil prices to have a major impact on its cash flow in 2020, making its dividend yield safe.
Enbridge’s payout ratio is less than 60%, which adds to its investment-grade balance sheet. It has strong financials that have helped it grow its dividends by 11% annually in the last 25 years.
If we estimate Enbridge to grow dividends by 8% in the upcoming decade, its annual dividend payout will increase from $2,430 to $4,500 over the course of 10 years, on an investment of $30,000.
A high-growth REIT
The second stock on the list is NorthWest Healthcare (TSX:NWH.UN), which has a yield of 7.5%. This healthcare-focused REIT provides unit holders access to quality healthcare real estate investments in seven countries.
NorthWest is part of a recession-proof industry and is a top defensive play. During the March quarter, it was one of the top-performing REITs as the majority of properties remained open. Due to the ongoing uncertainty, NorthWest has shifted its near-term priorities from growth initiatives to maximizing liquidity and operating efficiencies and will limit non-essential capital spending.
NorthWest pays monthly dividends, making it an ideal stock for the income investor. It ended Q1 with 183 properties and an occupancy rate of 97.3%. The company is a solid long-term pick due to its focus on growth and inflation-indexed leases. Its average lease expiry term is 14.4 years and its growing portfolio will help the company sustain payouts in 2020 and beyond.
Pembina Pipeline has a dividend yield of 7.9%
Similar to Enbridge, Pembina also generates a majority of its cash flows from long-term contracts. This fee-based model has helped the company distribute $4.5 billion to shareholders in the last five years. Pembina has also increased dividend payments at an annual rate of 5% since 2011.
Despite low oil prices, Pembina’s payout ratio of about 60% makes a dividend cut unlikely. Further, 80% of the company’s supply agreements are with investment-grade counterparties. Pembina pays a monthly dividend of $0.21 per share, which means annual dividends are $2.52 per share at writing.
The Foolish takeaway
If you invest a total of $80,000 among these three companies, you can generate $6,240 in annual dividends or $1,560 in quarterly dividends.
If these companies increase dividend payouts by 5% annually in the next 10 years, your dividends will rise to $9,500 at the end of 10 years.
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The Motley Fool owns shares of and recommends Enbridge. The Motley Fool recommends NORTHWEST HEALTHCARE PPTYS REIT UNITS and PEMBINA PIPELINE CORPORATION. Fool contributor Aditya Raghunath has no position in any of the stocks mentioned.