Investing for Retirement? Check Out These Dividend-Paying Stocks in Canada

Dividend-paying stocks like First National Financial are on sale in June 2023.

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Are you investing for retirement?

If so, it pays to look into dividend stocks.

Dividend stocks are among the best investments for retirees to buy because they pay stable, consistent income that does not depend on stock price fluctuations. Theoretically, it makes little difference whether your returns come from price gains or dividends, but in practice, collecting dividends spares you the fate of having to sell in down markets. For this reason, retirees are well advised to own dividend/interest-paying assets. In this article, I will explore three dividend stocks that might be worth looking into today.

Cenovus Energy

Cenovus Energy (TSX:CVE) is a Canadian energy stock that extracts and sells crude oil. It also sells natural gas and operates a refinery. CVE stock has fallen about 26% over the last 12 months, owing to the fact that oil and natural gas have fallen in price. WTI crude oil is down 41% from 2022 highs, and natural gas is down as much as 75% in some countries. Naturally, this situation means that Cenovus Energy will earn less revenue and profit than it did last year, but the markets appear to be overreacting to the decline in the price of oil. CVE stock is currently trading at just 8.8 times earnings and 4.5 times operating cash flow. It’s fairly cheap. Even if earnings continue declining at the same rate as in the first quarter, the stock will remain cheap by the end of the year.

Speaking of which, here are CVE’s earnings results from the first quarter:

  • $1.4 billion in adjusted funds flow, down 46%
  • $294 million in free funds flow, down 94%
  • $636 million in earnings, down 61%
  • $6.6 billion in debt, up 55% from the prior quarter

As you can see, the company’s earnings declined and it took on additional debt. It was basically not a good showing, but the stock is down so much now that it may be worth buying at today’s prices. I definitely wouldn’t “go all in” on a stock like this one, but a small position in a well-diversified portfolio could make sense.

First National Financial

First National Financial (TSX:FN) is a Canadian non-bank mortgage lender. It makes money by lending money to people who want to buy homes, much like a bank does. The difference is, First National does not take deposits. Instead, it funds its loans from funds on its own balance sheet that can’t simply be withdrawn by depositors. This is an important advantage. This year, many banks failed when depositors rushed to withdraw their money. First National is not exposed to that risk. It managed to achieve positive earnings growth in 2022, and it’s still going strong today. To top it all off, the stock has a 6.2% dividend yield!

TD Bank

The Toronto-Dominion Bank (TSX:TD) is a bank stock that I personally own a fair bit of. The stock has a 4.95% dividend yield at today’s prices and has a very long track record of dividend growth. This year was a big year for TD Bank. The company successfully bought out the U.S. investment bank Cowen and cancelled its deal to buy First Horizon. I consider the cancellation of the First Horizon deal a positive, because TD offered too high a price for that bank. TD is very profitable, with a 30% net margin and trades at just 9.3 times earnings. This is a stock I plan on holding for a while.

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 Andrew Button has positions in Toronto-Dominion Bank. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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