If you are a retiree or nearing retirement, owning safe and reliable dividend stocks is crucial. The preservation of capital and stability of income are key to sleeping well at night.
Guaranteed Investment Certificates (GICs) and fixed-income investments are by far the safest investments for passive income. Fortunately, with interest rates higher, returns are also higher right now. However, you don’t get to participate in the earnings or growth of a business.
That’s why stocks can be attractive. Not only do you get income, but you can also grow your capital. Now, it can be volatile investing in stocks, so it is crucial to invest with an extended time horizon. If you are looking for safe dividend stocks that are ideal for a retiree, here are three to consider for the long term.
An ultra-safe dividend stock
Fortis (TSX:FTS) is the ideal dividend stock for retirees because of its decent dividend and its safe business profile. Fortis operates transmission and distribution utilities across North America. In essence, this is one of the safest segments within the safest sectors.
Fortis has consecutively increased its dividend for 49 years. In 2023, it should hit the coveted “Dividend King” status of 50 consecutive years of dividend growth. In 2022, Fortis grew earnings per share by 7% to $2.78. It also increased its dividend 6%.
Fortis has a well-balanced, well-planned +$22 billion, five-year capital plan. It anticipates this could grow its rate base by around 6% annually. It believes this could lead to a steady 4-6% annual dividend increases as well. So, for modest capital and income growth, this is a very solid Canadian dividend stock. It yields 4.2% right now.
An infrastructure stock for dividends
If you are looking for a slightly higher dividend yield, Pembina Pipeline (TSX:PPL) might be a stock for you. This dividend stock yields 5.65% today. Pembina provides infrastructure services to energy producers across Western Canada. Over 85% of its earnings are contracted, so it earns a safe income stream that more than supports its dividend.
In fact, even when oil prices collapsed in 2020, Pembina was still able to maintain its outsized dividend. Given strong energy prices in 2022, it had a record year. It grew earnings before interest, tax, depreciation, and amortization (EBITDA) by 9% to $3.75 billion. It also increased its dividend for the first time in a few years by about 3%.
Pembina has a really good balance sheet and a conservative payout ratio. This means its dividend is very sustainable and could continue to grow in the coming years.
A solid real estate stock
Like its name, Granite REIT (TSX:GRT.UN) is a solid stock for dividends. With a market cap of $5.2 billion, it is the largest industrial real estate investment trust in Canada. Industrial real estate has been one of the most resilient asset classes since the pandemic. Trends like e-commerce, just-in-case inventory, and on-shoring are resulting in very high demand.
In fact, in its recent fourth quarter, Granite saw rental rates on new leases increase by 24%. For the year, it grew adjusted funds from operation per unit by 8% to $3.75.
Granite has an industry leading balance sheet that is supported by a very high-quality property portfolio. Granite has increased its dividend annually for more than 10 years. It is very conservatively managed, and one could expect steady income and capital returns ahead.