Several factors can influence your investment strategy, including the phase of life you are in. When you are far from your retirement years, the focus might be growth and growing your savings to as large a nest egg as you practically can by your retirement years. As a retiree, your focus might be generating an income using your nest egg.
One of the most practical ways to generate a substantial income using your retirement nest egg is to convert it (or part of it) to healthy dividend stocks. It might not be enough to help you survive on its own, but it might be enough in conjunction with the Canada Pension Plan and Old Age Security. The TSX has hundreds of compelling dividend stocks, but a handful of aristocratic elites stand out from the rest as a retiree’s best friend.
An energy giant
As the largest energy company in Canada, the largest pipeline company in North America, and one of the largest companies on the TSX, Enbridge (TSX:ENB) earns the title of a “leader” in multiple capacities. What Enbridge lacks in capital-appreciation potential, it more than makes up for as a dividend stock.
The stock has risen barely 23% in the last five years, and even though there is a decent possibility that a long-term bullish period in the energy sector might help the stock go up and stay up in the long run, that’s not what attracts retirees to this stock.
Not only is Enbridge an established Aristocrat, but its safe business model helps it stand apart from other energy stocks and provides financial stability to the dividend. The growing dividend also neutralizes the impact of inflation on your dividend income to some extent.
A telecom giant
Telus (TSX:T) is one of the three telecom giants in Canada, and it stands out from the other two thanks to a healthy mix of modest capital appreciation and a relatively high dividend yield. The stock has risen by about 46% in the last 10 years, and its growth has been relatively consistent and resilient against weak market conditions.
It’s also a Dividend Aristocrat that’s currently offering a 5.3% yield and raises its payouts after every two quarters. It’s a financially stable company with a diverse business model.
Telecom is its primary business, but it’s also emerging as a local leader in home security and telehealth. It’s also well positioned to become the leader in the Canadian Internet of Things (IoT) space or at least outpace the other two companies in this domain.
A bank stock
While National Bank of Canada (TSX:NA) is among the six largest banks in Canada, it’s the smallest of the bunch, so calling it a “giant” might not be apt. But it can be counted as one of the best picks among bank stocks in Canada, because it doesn’t just offer financially healthy and generous dividends but also helps with capital appreciation. The stock has risen by about 176% in the last 10 years.
A stock like this can help retirees enjoy a dividend-based income while offsetting any capital losses they sustain from other dividend stocks in their portfolio. This ensures that the overall value of the income-producing portfolio doesn’t fall over time. So, even if the retirees have to revert to liquidating part or all of their portfolio, they are not in deficit.
Foolish takeaway
The three stocks offer a good combination of dividends and capital-appreciation potential. As all three are Dividend Aristocrats, they can also help a retiree’s dividend income keep pace with inflation/rising cost of living — something that pensions are not well equipped for.
