The breakout of COVID-19 in 2020 and soaring inflation since the start of this year have altered retirement plans. Canadians might have to push back their retirement dates due to financial uncertainties, but it doesn’t mean their retirement saving strategy must change.
Long-term investing goes hand in hand with retirement planning. Thus, if you’re invested in income-producing assets like bonds, GICs, ETFs, mutual funds or dividend stocks, stay the course. Don’t liquidate them, unless there’s an urgent need for cash.
According to economists, high prices could remain elevated longer than expected. Thus, holding cash could be a disadvantage, because inflation will reduce its value in due course. Fortunately, Canadians can hedge against inflation through the Registered Retirement Savings Plan (RRSP) or Tax-Free Savings Account (TFSA).
For investment options, dividend stocks deliver higher returns than other instruments. However, the key to ensuring tax-free or tax-sheltered money growth is to own shares of companies that can endure market volatility.
Dividend pioneer
The preference for Bank of Montreal (TSX: BMO)(NYSE: BMO) as an anchor holding in an RRSP or TFSA is understandable. Canada’s oldest and fourth-largest bank is TSX’s dividend pioneer. Its dividend track record (193 years) is approaching two centuries.
The big bank stock is an exciting pick because a mega-merger is coming soon. BMO will acquire California-based Bank of the West from French bank BNP Paribas for US$16.3 billion. While some industry analysts say it’s a high-stakes bet, the proposed transaction will give BMO a significant scale in the United States.
BMO expects to obtain regulatory approval by year-end 2022. Once the merger is complete, BMO Harris, its U.S. retail banking arm, will become the 13th-largest U.S. commercial bank by consolidated assets. The deal will also expand BMO’s retail banking presence in affluent markets like Los Angeles, San Francisco, and San Jose.
The $91.46 billion bank announced a 25% dividend hike late last year. It currently trades at $136.21 per share and pays a 3.91% dividend.
Monthly payout
Pembina Pipeline (TSX: PPL)(NYSE: PBA) is another preferred choice of income investors. Because the energy stock pays monthly dividends, RRSP and TFSA balances can grow faster. You can reinvest the dividends 12 times in a year instead of four. At $48.61 per share (+29.13% year to date), the dividend offer is 5.18%.
The $26.75 billion company is a vital player in North America’s oil & gas midstream industry. Pembina started paying dividends in 1997 and has paid approximately $11 billion to shareholders since. Its diverse and integrated assets, including an 18,000-kilometre pipeline network, deliver profitable growth and enhance shareholder value.
According to management, its operations along the hydrocarbon value chain enable Pembina to offer an array of essential midstream and marketing services. Management added that Pembina is well positioned to continue building on its base business and supporting long-term growth opportunities.
Despite the challenges and industry headwinds ahead, Pembina has several exciting opportunities to pursue. The company wants nothing more but to differentiate itself as an industry leader. Note that this top-tier income stock’s dividend-growth streak is 10 years.
Uninterrupted cash flows
The future is indeterminable, but it shouldn’t overwhelm Canadians who are saving for retirement. If you own shares of BMO or Pembina, hold them for good. Both stocks will keep the quarterly or monthly cash flows coming.
