Stocks are a risky investment for retirees. However, shares of fundamentally strong and high-yield dividend-paying stocks could be an excellent choice for retirees to boost their retirement income. Thankfully, the Canadian stock exchange has several such fundamentally strong stocks that have been paying and increasing their dividends for decades. This makes them reliable choices to earn a steady retirement income.
Against this background, I am bullish on the shares of Fortis (TSX:FTS), Enbridge (TSX:ENB), and TC Energy (TSX:TRP). These corporations have paid and raised their dividends for more than two decades. Further, their well-covered payouts and resilient business model indicate that retirees can rely on these companies. Let’s find out why these three stocks are a great choice for retirement income.
Fortis
Fortis is a must-have stock for retirees to earn a worry-free income. It owns and operates low-risk and regulated electric utility businesses that consistently generate solid cash flows to support its payouts. Thanks to its low-risk assets, Fortis stock is less volatile, making it a reliable investment for retirees.
It’s worth highlighting that this utility company has been regularly enhancing its shareholders’ returns through higher dividend payments. Notably, it has increased its dividend for 49 consecutive years. Furthermore, the company remains upbeat and expects to distribute more cash to its shareholders through higher dividend payments in the coming years.
Fortis’s $22.3 billion capital plan will likely expand its rate base, which will support higher payouts. The utility company expects its rate base to grow at a compound annual growth rate (CAGR) of over 6% through 2027, which will help the company to increase its dividend by 4-6% annually during the same period. Fortis’s low-risk business model, solid dividend payment and growth history, a reliable yield of about 3.9%, and visibility over future payouts make it an attractive retirement income stock.
Enbridge
Like Fortis, Enbridge is another stock to earn a steady income post-retirement. The energy company has been paying dividends for about 68 years. Meanwhile, its dividend sports a CAGR of 10% in the last 28 years. Impressively, Enbridge has increased its dividend, even amid a challenging operating environment like COVID, which shows the strength of its business and the resilience of its cash flows.
Its highly diversified income sources, inflation-protected earnings, continued investments in conventional and renewable energy, power-purchase agreements, and low-risk, utility-like projects bode well for future growth and will likely support its payouts.
While Enbridge is poised to capitalize on the long-term energy demand, the company could continue to enhance its shareholders’ value through higher dividend payments. Enbridge offers a lucrative yield of 7.1% (based on its closing price on June 1). Further, its payout ratio of 60-70% is sustainable in the long term.
TC Energy
With a stellar history of growing its dividend for more than two decades (23 years, to be precise) and a high yield of 6.7%, TC Energy is an excellent stock to earn income amid retirement. Thanks to its contracted and regulated assets, TC Energy’s dividend increased at a CAGR of 7% during the same period.
TC Energy generates about 95% of its earnings from regulated and contracted assets, implying that its payout is safe. Meanwhile, its $34 billion secured growth projects will expand its assets base and drive future payouts.
Notably, it expects to grow its future dividend by 3-5% annually in the coming years, implying retirees can expect a growing stream of income with each passing year.
