Stocks are an inherently risky investment for retirees. Further, the uncertain economic environment keeps the market volatile, making it tough for investors to earn capital gains. Nonetheless, retirees seeking regular income could consider adding fundamentally strong, dividend-paying stocks to their portfolios.
However, retirees should take caution and not rely on any dividend-paying or high-yield stock, as payouts are not guaranteed, and corporations may cut or put a pause on their dividend payments. Thus, retirees should pick stocks with solid fundamentals, a growing earnings base, and a history of consistent dividend payment and growth, regardless of the market conditions.
While the TSX has many solid dividend-paying stocks, I am bullish about Enbridge (TSX:ENB) and Fortis (TSX:FTS). These two dividend powerhouses have a history of stellar dividend payments and growth and a growing earnings base, making them retiree’s best friends. Let’s look into these two stocks in detail.
Enbridge
Enbridge is my top pick, given its resilient business, ability to grow earnings and cash flows, and consistent dividend payment and growth in all market conditions. This energy infrastructure company transports crude oil and natural gas and is an integral part of the energy value chain.
Enbridge has paid a dividend for 68 consecutive years and raised it for the last 28 years. Notably, Enbridge’s dividend increased at an average annualized growth rate of 10% during the same period. What stands out is its high yield. It offers a quarterly dividend of $0.887 per share, translating to an attractive yield of 6.7%.
Enbridge’s high-quality assets, highly diversified revenue streams, long-term contractual arrangements, and solid secured capital projects will likely drive its distributable cash flows and dividend payouts in the coming years. At the same time, its continued investments in renewable and conventional energy assets position it well to capitalize on long-term energy demand and enhance its shareholders’ returns through higher dividend payments.
Enbridge’s payout ratio of 60-70% is sustainable, making it a must-have stock for retirees to generate reliable passive income for decades.
Fortis
Fortis is another top-quality stock to earn worry-free income. Fortis operates low-risk and regulated electric utility businesses that make its stock less volatile. Also, it enables the company to generate predictable and growing cash flows that drive higher dividend payments.
What’s more? This utility company has uninterruptedly raised its dividend for 49 years. Further, Fortis expects to increase its dividend by 4-6% annually through 2027. Its future payout forecast is based on the continued expansion of its rate base. Notably, Fortis expects its rate base to increase at an average annualized growth rate of more than 6% during the same period.
Fortis’s $22.3 billion capital plan and focus on growing its renewable power capacity positions it well to enhance its shareholders’ returns. Investors can earn a decent yield of 3.7% by investing in it near the current price levels. In short, retirees can continue to make a reliable dividend income through Fortis stock.
