Retirees: 2 Game-Changing Stocks for Your TFSA

Retired Canadians can avoid financial dislocation by holding two game-changing stocks in their TFSAs.

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Many retired Canadians own dividend stocks to supplement their Old Age Security (OAS) and Canada Pension Plan (CPP). While both pensions are for life, their combined amounts aren’t enough to provide the desired quality of life in retirement. On the TSX, two blue-chip stocks are game changers for retirees.

If eternal income streams is your goal in the sunset years, you can’t go wrong with Royal Bank of Canada (TSX:RY)(NYSE:RY) and Enbridge (TSX:ENB)(NYSE:ENB). The former is the most valuable publicly listed company in Canada, while the latter boasts a low-risk commercial and financial profile.

Make it your high priority

Retired Canadians or future retirees should make it high priority to create low-risk, passive income through their Tax-Free Savings Accounts (TFSAs). If you hold shares of RBC or Enbridge in your tax-advantaged investment account, you’re assured of uninterrupted cash inflows every quarter.

The average dividend yield of the big bank (4.04%) and energy infrastructure company (6.06%) is 5.05%. If you allocate $3,000 in each to maximize your TFSA limit for 2022, your money will generate $75.75 every quarter. Assuming your available contribution room is $50,000, the quarterly tax-free income is $631.25.

Multiple dividend hikes

RBC has been paying dividends since 1870 (152 years). The $178 billion bank increased its dividends by 11% in late 2021 then announced a 7% increase following its earnings release for Q2 fiscal 2022. In the first half of fiscal 2022 (six months ended April 30, 2022), net income rose 6% year over year to $8.35 billion versus the same quarter in the prior year. The bank stock trades at $126.68 per share.

The bank’s credit quality in the said quarter has also improved owing to the $246 million decrease in the total provision for credit losses (PCL). Dave McKay, RBC’s president and CEO, said, “We remain well-positioned for future growth, and to deliver differentiated long-term value for our clients, employees and shareholders.”

RBC Wealth Management is preparing to take over Brewin Dolphin by the end Q3 2022. The acquisition of the London-based company will enable the Canadian bank to transform its wealth management business in region significantly. It also means securing the number three market position in the U.K. and Ireland.

Quality investment

Enbridge is a quality investment because of its diversified sources of cash flows. Four blue-chip franchises combine to drive cash flow growth. At $56.74 per share, you get real value for your money. The $117.23 billion company has raised it dividends for 27 straight years. Also, the total return in 3.01 years is 51.16% (14.74% CAGR).

In Q1 2022, adjusted earnings increased 4.3% to $1.7 billion versus Q1 2021. Notably, cash flow from operating activities grew 14.6% year over year to $2.93 billion. According to its president and CEO Al Monaco, Enbridge’s competitive advantages include a diversified asset footprint, integrated transportation systems in North America, and established renewable power assets.

Take control

The biggest concerns now for retirees are the decrease in purchasing power and increasing expenses. According to the results of a survey by RBC Insurance, 28% of retired Canadians are spending more than anticipated. The solution to address the twin concerns is to take control by holding game-changing stocks in your TFSA.

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 recommends Enbridge.

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