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
Canada’s energy heavyweight Enbridge (TSX: ENB)(NYSE: ENB) remains one of the top picks when it comes to dividend investing. Enbridge is the largest energy infrastructure company in North America.
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%
Another pipeline stock for your retirement portfolio is Pembina Pipeline (TSX: PPL)(NYSE: PBA). This Canada-based energy stock is trading at $31.9, which indicates a forward 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.
