Retirees: Here’s How to Earn a Yield of at Least 5% Amid Volatility

These stocks are reliable investments to generate consistent income. Also, investors can earn yields of at least 5%.

Sneha Nahata

Sneha is a M.Sc. in finance and has been a Motley Fool contributor since mid-2020. Sneha specializes in writing about bank, energy, consumer and TMT (technology, media, and telecom) stocks. She focuses on identifying winning long-term stock picks.

Published June 6, 2022 2:30 pm EDT

Dividends offer steady income during retirement. However, as stocks are relatively risky, investors should take caution before investing in equity to generate passive income. Against this backdrop, let’s look at a few TSX stocks that have well-protected payouts, generate ample cash flows to fund growth initiatives and dividend payments, and are yielding at least 5%.

Enbridge

Enbridge (TSX: ENB)(NYSE: ENB) is a safe stock to bet on for steady dividend income. My bullish outlook on Enbridge stock stems from its highly diversified cash flows, stellar dividend payment history, and ability to increase its payouts.

For context, Enbridge has over 40 diverse cash flow streams. Moreover, it has been paying dividend for about 67 years. Further, Enbridge has increased its dividend for 27 years and is yielding over 5.8% at current levels.

Looking ahead, Enbridge remains confident of growing its distributable cash flow (DCF) per share by 5-7% through 2024. This implies that Enbridge’s future dividend could have equal the same growth. The 5-7% growth in its DCF/share appears achievable given the strong energy demand. Furthermore, its utility-like cash flows, high asset utilization rate, and inflation-protected EBITDA augurs well for DCF growth.

Also, its solid secured capital program, acquisitions, productivity savings, and growth opportunities in the renewables segment could support its future cash flows. It’s worth mentioning that Enbridge’s target payout ratio of 60-70% of its DCF is sustainable and its payouts are well protected.

Algonquin Power & Utilities

Utility stocks are safe bets for income investors. Their rate-regulated assets, long-term contractual arrangements, and rate base growth drive their cash flows and dividend payments. Within the utility sector, Algonquin Power & Utilities (TSX: AQN)(NYSE: AQN) stock offers a reliable and high dividend yield of 5.1%.

The company operates a low-risk business underpinned by rate-regulated assets. It has consistently paid and increased dividend for 11 years and is on track to hike it further.

It’s worth mentioning that Algonquin Power expects its earnings to increase by 7-9% over the next five years, led by mid-teens growth in its rate base.

Along with its growing rate base, expansion of renewables capacity and opportunistic acquisitions bode well for future growth. Also, Algonquin Power and Utilities’s target payout ratio of 80-90% is sustainable in the long run.

NorthWest Healthcare Properties REIT

NorthWest Healthcare (TSX:NWH.UN) is a safe stock to buy for a steady income. Its diversified and defensive portfolio of healthcare real estate assets generates stable cash flows amid all market conditions, which easily covers its payouts.

This REIT benefits from a high occupancy rate and a long lease expiry term. What’s more? NorthWest’s tenants are backed by the government, which adds stability to its business. Also, a substantial portion of NorthWest’s rents are inflation indexed.

Looking ahead, NorthWest’s focus on expanding into high-growth markets augur well for growth. Further, NorthWest stock offers an attractive dividend yield of 6.2%.

Bottom line

These Canadian companies are a reliable investment to generate consistent income. Also, investors can earn a yield of at least a 5% by investing in these stocks.