Nearing Retirement? The 3 Best TSX Dividend Stocks to Buy Now

Here are three TSX stocks to take care of you in your sunset years.

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Canada has several names when it comes to safe, reliable dividend investing. These dividend-paying stocks could rather enhance your lifestyle in your sunset years.


Canada’s top utility Fortis (TSX:FTS) stock currently yields 4%, which is higher than peer TSX stocks. It keeps growing slowly but steadily in almost all economic cycles, enabling stable dividend payments. A $10,000 investment in FTS stock at a price of $55 a share would be around 182 shares. That investment would make $410 in annual dividends. The dividend amount will likely increase yearly as the company grows its earnings.

The demand for its services does not significantly move on business cycles. Even in recessions, people use electricity or gas services, which makes its cash flows quite visible. In the last 10 years, Fortis has increased its per-share earnings by 5% compounded annually, which is in line with its peers.

FTS stock has been weak this year, mainly due to macro challenges. Utility stocks underperform during rising interest rate hikes. And this was a year when we saw extremely steep rate increases. So, FTS stock was corrected by nearly 25% between May and October 2022. Such large swings are rare for utility stocks.

However, this could be an opportune time to enter utilities. As recession fears rise next year, utility stocks like Fortis will likely remain at centre stage.

Pembina Pipeline

Energy pipeline companies offer better risk/reward propositions for conservative investors. Consider Pembina Pipeline (TSX:PPL). It paid a total dividend of $2.55 per share this year, indicating an attractive yield of 5.5%.

Notably, energy pipeline companies like Pembina are relatively safer, as they are less correlated to oil and gas prices. Their revenues are derived from long-term, fixed-fee contracts, enabling earnings stability.

Pembina has a diversified business profile. It generates more than two-thirds of its total revenues from pipelines, while the rest comes from storage facilities and marketing. In the last 10 years, its per-share earnings have grown by 8% compounded annually.

PPL stock has returned 25% this year and 11% compounded annually in the last 10 years.     

Royal Bank of Canada

While an impending recession could also dent bank stocks, some Canadian bank names look appealing after the recent correction. Royal Bank of Canada (TSX:RY) stock is trading 13% lower than its 52-high in early this year.  

Royal Bank is Canada’s largest bank that serves more than 10 million customers. The scale and earnings stability make it stand tall among its peers. While its earnings growth for the recently reported quarter stayed flat, the net interest margin reported an encouraging recovery. Net interest margin is the difference between what interest it pays on deposits and what it earns on loans.

As interest rates are increasing, RY will likely see higher net interest margins next year as well. However, higher rates dent borrowers’ repaying capacity, which accelerates bad loans.

RY stock yields 4%, which is in line with its peers. It aims to distribute 40-50% of its earnings as dividends every year. Stocks like RY might underperform in the short term. But if your investment horizon is longer, RY could create a decent reserve. In the last 10 years, RY stock has returned 13% compounded annually, notably beating TSX stocks.

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.

The Motley Fool recommends Fortis and Pembina Pipeline. The Motley Fool has a disclosure policy. Fool contributor Vineet Kulkarni has no position in any of the stocks mentioned.

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