Retirees: 2 Safe Stocks With +5% Dividends

Canadian seniors can boost their retirement income and live comfortably throughout the sunset years by accumulating shares of two safe dividend stocks as early as now.

| More on:
Senior Man Sitting On Sofa At Home With Pet Labrador Dog

Image source: Getty Images

Many Canadians feel they are behind in their retirement goals. The COVID-19 pandemic in 2020 and runaway inflation in 2022 have altered financial plans of soon-to-be retirees. Outliving retirement savings is a major concern, especially for those who didn’t plan ahead.

Financial planners estimate that you would need around 70% of the average pre-retirement income to fund one sunset year. The Canada Pension Plan (CPP) replaces only 25%, while the Old Age Security (OAS) boost the replacement level by 20%. Even with the combined pensions, there’s an income gap of at least 25% you must fill to live comfortably in retirement.

One strategy to bump up retirement income is dividend investing. Your capital remains intact while collecting recurring income streams. Among the safe options for retirees are Manulife Financial (TSX:MFC)(NYSE:MFC) and BCE (TSX:BCE)(NYSE:BCE). The payouts should be rock steady, regardless of the market environment.

Sample computation

For conservative purposes, let’s add the average CPP of $799.32 (as of October 2021) to the maximum OAS of $642.25 (beginning July 2022) to estimate your lifetime incomes. If the CPP represents 25% of the average pre-retirement income, then $3,117.28 per month is 100%.

When you combine the CPP and OAS ($1,421.57), the replacement level goes up to 45%. Thus, you’d need a third income source that can produce an amount equivalent to the CPP to make 70%. Since the average dividend yield of Manulife and BCE is 5.25%, you can own $91,350 worth of shares each to create $799.32 in monthly passive income.

Retirement champion

Manulife Financial, a household name in life insurance globally, has a dividend-growth streak of eight years. Currently, the stock trades at $23.16 per share and pays a 5.70% dividend. In Q1 2022, the $44.57 billion insurer and financial services company reported a 275%, or $2.2 billion, increase in net income, despite the 4% drop in core earnings versus Q1 2021.

Roy Gori, Manulife’s president & CEO, said, “Our diversified footprint, operational resilience, and proven digital capabilities enabled us to deliver solid results in the first quarter, despite a challenging operating environment caused by the resurgence of COVID-19 and global market volatility.”

Manulife Investment Management supports more than 250,000 retirement plans and commits to retirement on a global scale. It has a diverse market footprint, owing to the strong presence in Canada, Asia, and in U.S. (John Hancock). The retirement assets under management and administration are more than $330 billion.

Healthy cash flows

BCE needs no introduction or hard sell, because everyone knows that telecommunications’ products and services are essential to individuals and businesses alike. The $62.75 billion telco and media company dominate in Canada’s telecom services industry. At $68.82 per share, the corresponding dividend yield is a hefty 5.35%.

The dividend heavyweight generates billions of dollars in revenue and profits every year. In Q1 2022, net earnings climbed 36% to $934 million compared to Q1 2021. According to Glen LeBlanc, CFO of BCE and Bell Canada, the company can execute on its strategic priorities in 2022 because of healthy cash flows and substantial liquidity.

Live well

Achieving retirement goals start with smart planning. Canadians can live well and comfortably in throughout the sunset years by accumulating shares of safe dividend stocks like Manulife and BCE today.  

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 Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

More on Dividend Stocks

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Magic: Earn Enormous Passive Income That the CRA Can’t Touch

If you're seeking out passive income, with zero taxes involved, then get on board with a TFSA and this portfolio…

Read more »

Man with no money. Businessman holding empty wallet
Dividend Stocks

2 Stocks Under $50 New Investors Can Confidently Buy

There are some great stocks under $50 that every investor needs to know about. Here’s a look at two great…

Read more »

think thought consider
Dividend Stocks

Down 10.88%: Is ATD Stock a Good Buy After Earnings?

Alimentation Couche-Tard (TSX:ATD) stock might not be the easy buy-case it once was. Here’s a look at what happened.

Read more »

money cash dividends
Dividend Stocks

TFSA Dividend Stocks: Earn $1,200/Year Tax-Free

Canadian stocks like Fortis are a must-have in your portfolio to earn tax-free yields for decades.

Read more »

sale discount best price
Dividend Stocks

1 Dividend Stock Down 11 Percent to Buy Right Now

Do you want a great dividend stock down 11% that can provide years of growth potential? Here's one heavily discounted…

Read more »

Growth from coins
Dividend Stocks

1 Grade A Dividend Stock Down 11% to Buy and Hold Forever 

If you're looking for the right dividend stock at the right price, you're going to want to consider this insurance…

Read more »

Target. Stand out from the crowd
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

Are you looking for dividend stocks to buy right now? Here are two top picks!

Read more »

edit Taxes CRA
Dividend Stocks

Tax Time: How to Keep More of Your Money

Nearly everyone hates paying taxes, although Canadians can lessen the financial pain with the right tax strategies.

Read more »