No amount of money is too small for one to start building a self-managed retirement income fund during an active work life. At times, opportunities to save as little as $400 can present themselves here, and there – some from federal tax credits, rebates, or other government programs. Investing in dividend stocks with reliable cash flows, proven dividend growth commitments, and relatively safe income payouts could be a smart way to begin a journey to a robust income portfolio that may allow you to sleep well at night.
Speaking of a $400 savings, residents of British Columbia may receive a $400 renter’s rebate if they stay in a rented home and earn between $60,000 and $80,000 per annum, starting with the 2023 tax year. Opportunities to save can sometimes present themselves unexpectedly. Most likely, your tax consultant could find some tax-saving opportunities before the deadline for submitting 2022 tax returns arrives on May 1, 2023 (or June 15, 2023, for self-employed individuals).
Here are two of the reasonably smart dividend stocks I’d buy with a $400 savings this year.
Real estate is selling cheaply in Canada this year. Investors with as little as $400 can buy a stake in some of the best quality publicly traded real estate portfolios managed by some of the brightest minds in the sector. Investing in real estate investment trusts (REITs) like CT REIT (TSX:CRT.UN) today could allow you to lock in some juicy, recurring, and seemingly secure income yields, as you wait for the real estate sector to find its feet again.
CT REIT pays out one of the most covered monthly distributions, yielding 5.4% annually. The REIT has raised its distributions for 10 consecutive years now. CT has a robust development pipeline that is already fully booked, mostly by its key tenant, the Canadian Tire Corporation (TSX:T) – a best-in-class retail giant with an investment-grade credit rating. Rents are almost guaranteed to keep flowing, and CT REIT is determined to keep paying its loyal investors growing distributions.
Units have lost about 4% of their value over the past week, providing a better buying opportunity for long-term holders.
Take note that REITs are exempted from paying income taxes. Moreover, you may pay no taxes on REIT distributions if you stash them in your tax-free savings account (TFSA). Smart, isn’t it?
Canadian Utilities stock
Canadian Utilities (TSX:CU) stock could add a decent 5% initial dividend yield to your dividend portfolio while alleviating recession fears in a worried investor’s heart. The company’s consistent history of growing its dividend payouts every year for a record 51 years remains intact. This is possible as it keeps reinvesting its free cash flows to grow its rate base and serve a growing number of needy customers. Growing dividends from Canadian Utilities’ regulated cash flows could mean a growing income yield and higher total returns in your portfolio over time.
The company holds a $22 billion portfolio of globally diversified electricity generation and natural gas transmission and retail assets, meeting the energy needs of businesses and households. The utility should pay growing dividends to stock investors based on its highly recurring contracted cash flows, and management’s stellar execution in reinvesting for growth.
Investors who acquired Canadian Utilities stock 10 years ago have seen their quarterly dividends grow 83% over the past decade. The yield on the original cost has significantly grown over time. The utility pays out under 86% of its earnings, so the dividend is reasonably safe.