Relatively few Canadians have a private pension plan or an employer pension plan strong enough to carry them through their golden years in conjunction with the Canada Pension Plan and Old Age Security pensions. Naturally, they have to rely on their retirement savings to fill the gap that exists between their expenses and the pension they receive from the government.
Ideally, they should have enough savings to help them develop an income stream made up of dividend stocks. This would allow them to preserve their capital (assuming the dividend stock is not bearish in the long term) while producing a decent enough passive income to augment their pension.
If you are a retiree planning to convert your savings into a reliable income stream, there are two blue-chip stocks you should look into.
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An asset management company
Brookfield Asset Management (TSX:BAM), which used to represent the bulk of the Brookfield empire, is now a spin-off of the larger corporation. It’s still a considerable entity with a market value of about $16.6 billion. The alternative asset management company holds assets of over $825 billion, spread out over 30 countries.
Brookfield Asset Management stock is quite new and only started trading on the Canadian and American stock markets at the end of last year. However, it’s tied to a hundred-year-old company with an impressive global presence and many of the same strengths that the original Brookfield stock carried.
This makes it a compelling dividend stock, even though it has only paid one quarterly dividend so far and has announced the next one for the end of June. The yield is about 3%, but it comes with other benefits, like financially stable and reliable dividends as well as decent capital-appreciation potential.
A bank stock
If you are looking for reliable dividend income, almost all Canadian bank stocks are compelling picks, but Royal Bank of Canada (TSX:RY) stands out from the rest for several reasons. It’s the largest Canadian bank by market cap and one of the largest banks in North America by assets. Despite having an enormous local presence, it generates a significant amount of its revenue from its international operations.
It has been paying dividends to its investors for over 100 years and has been consistently raising its payouts for the last 12 years. The yield is usually decent enough, and the payouts are financially stable. It also offers a good capital-appreciation potential that will keep your retirement savings parked in this bank stock growing ahead of inflation, assuming the stock keeps performing the way it has in the past.
Foolish takeaway
Converting your savings into income-producing assets is an important element of retirement planning, and it’s imperative that you look beyond the yield itself. Stocks like these two can help you with more than just retirement income.
They can keep your nest egg growing over time, allowing you to liquidate part of your savings to meet any significant expenses without making your financial situation too precarious.
