Retirement planning is crucial as it ensures a financially secure future. Importantly, individuals must consider their current financial position, future goals, and risk appetite when planning their retirement. One of the key steps would be to start early to benefit from the power of compounding.
Meanwhile, while investing in equity markets for their retirement, investors should be careful to not be tempted to invest in high-risk, high-reward stocks. They should consider stocks with solid underlying businesses, strong cash flows, and dividend-paying stocks, which deliver stable returns irrespective of the economic outlook. Considering these factors, here are three top Canadian dividend stocks you could add to your retirement portfolio right now.
Enbridge
Given its contracted business, excellent record of dividend growth, and high yield, Enbridge (TSX:ENB) would be one of the top dividend stocks to have in your portfolio. The midstream energy company operates a pipeline network transporting crude oil and natural gas across North America, with approximately 98% of its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) generated from long-term cost-to-service contracts. So, commodity price fluctuations will not significantly impact its financials, thus delivering stable and predictable cash flows.
Supported by its healthy cash flows, Enbridge has paid dividends consistently for the last 68 years while raising the same for the previous 28 years at a CAGR of 10%. In February, the company hiked its quarterly dividend to $0.8875/share, translating its forward yield to 7.11%. Meanwhile, the company is progressing with its $17 billion secured capital program, which could drive its financials in the coming years. So, I believe Enbridge would be a worthy addition to your retirement portfolio.
BCE
The demand for telecommunication services is growing in this connected world. Besides, the higher initial fixed expenses have created a vast entry barrier for new entrants, thus supporting incremental margins for existing players. So, I have chosen BCE (TSX:BCE), which has raised its dividends by over 5% annually for the last 15 years, as my second pick. It currently pays a quarterly dividend of $0.9675/share, translating its forward yield to 6.31%.
BCE has planned capital investments of around $14 billion from 2020 to 2022, expanding its 5G and broadband infrastructure. With most of the infrastructure in place, the telco giant expects to lower its capital investment intensity, thus increasing its free cash flows. Meanwhile, the company continues to boost its 5G coverage and expects to cover 85% of the population by this year-end. It also expects to add 650,000 new broadband connections, contributing to its growth. Amid these initiatives, management hopes to grow its free cash flows by 2–10%, thus making its future payouts safer.
Fortis
Fortis (TSX:FTS) operates a highly regulated utility business, with around 93% of its assets involved in low-risk transmission and distribution. So, it generates stable and predictable cash flows irrespective of the economic outlook, thus allowing it to raise its dividends consistently for the last 49 years. It currently pays a quarterly dividend of $0.565/share, translating its forward yield to 3.98%.
Meanwhile, the company intends to invest around $22.3 billion through 2027, including $5.9 billion in clean energy. These investments could grow the company’s rate base at a CAGR (compounded annual growth rate) of 6.2%, thus driving its financials in the coming years. Given its growth initiatives, the company’s management hopes to raise its dividends by 4–6% annually through 2027. So, I believe Fortis would be an excellent stock to have in your portfolio.
