TFSA Retirees: How to Supplement Your CPP and OAS Payout in 2023

Blue-chip dividend stocks can help retirees create a recurring revenue stream to support CPP and OAS payouts in 2023.

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Individuals all over the world want to create enough wealth to spend a comfortable life in retirement. It makes little sense to depend solely on government-sponsored retirement plans such as the Canada Pension Plan (CPP) and the Old Age Security (OAS) due to their less-than-impressive payouts.

For instance, the average monthly CPP payout stands at $717.15, while the maximum monthly amount a Canadian retiree can receive via this pension plan is $1,306.57. Similarly, the average OAS payment stands a bit lower at $687.56.

Dividend stocks can help you supplement your OAS and CPP payouts

One capital-efficient way to supplement your pension payouts is by investing in a wide portfolio of dividend stocks. There are several blue-chip stocks trading on the TSX that offer investors a generous dividend yield, making them perfect for retirees.

TC Energy$561,571$0.90$1,413Quarterly

Further, retirees can also leverage the benefits of the TFSA (Tax-Free Savings Account) to create a recurring income stream that is exempt from Canada Revenue Agency taxes. The cumulative contribution TFSA room has increased to $88,000 in 2023, which can be reinvested in a portfolio of dividend stocks on the TSX.

Own stocks such as TC Energy in your TFSA

One of the largest companies trading on the TSX is energy infrastructure giant TC Energy (TSX:TRP). A well-diversified company, TC Energy currently offers investors a dividend yield of 6.4%. Since 2000, TC Energy has delivered annual returns of 12% to shareholders, easily outpacing the TSX in this period.

TC’s integrated network of pipelines helps to transport oil and gas across North America. Due to its base of rate-regulated assets, TC Energy can generate cash flows across business cycles, making it fairly recession-resistant. Further, 95% of its EBITDA (earnings before interest, tax, depreciation, and amortization) are backed by long-term contracts, which are indexed to inflation.

With $115 billion in assets, TC Energy is set to deploy another $34 billion in capital expenditures through 2028, allowing it to increase dividends between 3% and 5% in the medium term.

TC Energy’s robust business model enabled it to increase dividends at an annual rate of 6.2% since 2003, showcasing the resiliency of its cash flows. In the last 23 years, the energy behemoth’s asset base has grown from just $25 billion, driving annual dividends per share from $0.80 to $3.60 in this period.

TC Energy has also been among the top-performing TSX stocks since 2021 due to an inflationary environment where oil prices have remained elevated.

In the last 12 months, TC Energy’s profit margins have increased to an enviable 22%. It’s on track to report adjusted earnings of $4.26 per share in 2023, indicating the stock is priced at less than 14 times forward earnings, which is quite reasonable.

The Foolish takeaway

Investing $88,000 in TC Energy stock can help you earn $5,650 in annual dividends each year. If these payouts increase by 7% annually, your dividends could double in the next 10 years. Investors should identify similar dividend stocks trading on the TSX and create a portfolio to lower overall risk.

While dividend payouts are not a guarantee, there are several TSX stocks, including TC Energy, that have maintained and even raised dividends over several years.

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 Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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