Investing for Retirement? These Dividend Stocks Can Help You Get There

TD Bank and Brookfield Renewable Partners are two solid dividend-growth stocks to hold for decent total returns through retirement.

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It’s a common goal to invest for retirement. Here are some dividend stocks that can help you get there. They pay nice dividend income along the way and can provide some nice price appreciation as well.

TD stock

It’s a tough year for banks, including Toronto-Dominion Bank (TSX:TD), which has secured a leading position in Canada. An expected recession in Canada and the United States this year will lead to more bad loans. As well, credit tightening will result in slower loan growth. Additionally, TD Bank owns a 12% stake in Charles Schwab, which primarily has brokerage, wealth management, banking, and asset-management businesses in the United States.

The current headwind in the macro environment is exactly the kind of condition that allows investors to buy the quality Canadian bank stock on sale for long-term investment through retirement. At $77.60 per share at writing, the TSX stock trades at approximately 9.3 times earnings — a discount of north of 20% from its long-term normal valuation. Because of the weakness in the stock, investors can now buy shares at a boosted dividend yield of close to 5%.

In the long run, TD stock has increased its dividend. For example, its five-, 10-, and 20-year dividend-growth rates are, respectively, about 8.7%, 9.4%, 9.7%. Currently, it’s estimated to increase its earnings per share by about 6.2% per year over the next three to five years. Based on this growth and its safe dividend, investors can expect long-term estimated total returns of approximately 11% per year without any valuation expansion from the undervalued stock.

Brookfield Renewable Partners

As one of the largest and most diversified renewable power platforms that provide decarbonization solutions, Brookfield Renewable Partners (TSX:BEP.UN) has a long-term growth runway. Management believes that more than US$150 trillion of investments is needed for the decarbonization trend over the next three decades.

Presently, it has about 25 gigawatts (GW) of operational capacity across hydro (32% of capacity), wind (27%), solar (16%), and distributed energy, storage, and sustainable solutions (25%). And it has close to 110 GW of development projects in its pipeline!

One factor that makes BEP a top renewable energy stock to invest in is its consistent cash distribution increases. So far, it has hiked its cash distribution for 13 consecutive years. For reference, its 10-year cash distribution growth rate is 5.7%. Furthermore, management appears to be committed to continue increasing the cash distribution by at least 5% annually.

At US$31.83 per unit at writing, the analyst consensus 12-month price target suggests the stock trades at a discount of about 16%. At this quotation, it offers a cash distribution yield of 4.2%. Based on this distribution yield and assuming a growth rate of 5%, investors can anticipate long-term estimated total returns of approximately 9% per year without any valuation expansion.

Notably, BEP pays out U.S. dollar-denominated cash distributions. Because BEP pays out cash distributions, it may be better for investors to hold the units in a Registered Retirement Savings Plan/Registered Retirement Income Fund or Tax-Free Savings Account. Seek advice from a professional tax expert if you’re unsure.

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.

Charles Schwab is an advertising partner of The Ascent, a Motley Fool company. Fool contributor Kay Ng has positions in Brookfield Renewable Partners and Toronto-Dominion Bank. The Motley Fool recommends Brookfield Renewable Partners and Charles Schwab. The Motley Fool has a disclosure policy.

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