Dividend investing is a simple but effective strategy to build retirement wealth if your only assets are savings. You can create a snowball effect by reinvesting the payouts instead of pocketing them. When your capital compounds to a significant nest egg over time, dividend earnings become your regular income or sustenance in the sunset years.
However, uninterrupted, consistent payouts should be the primary considerations for selecting your anchor stocks, not high yields. Canadian National Railway (TSX:CNR), Rogers Communications (TSX:RCI.B), and Pembina Pipeline (TSX:PPL) are among the safest TSX stocks you can buy and hold for decades.
Economic growth engine
Canadian National Railway, or CN, faces multiple challenges yearly but overcomes them every time. The third-largest TSX company by market cap is an economic driver, trade enabler, and vital link in integrated supply chains.
The $103 billion company’s rail network (20,000 route miles) transports 300 million tons of finished goods, manufactured products, and natural resources throughout North America annually.
CN reported record first-quarter revenues and operating income in Q1 2023. The former rose 16% year over year to $4.3 billion, while the latter climbed 35% to $1.7 billion versus Q1 2022. The net income of $1.2 billion was 32.9% higher than a year ago.
Its President and CEO, Tracy Robinson, said, “We remain confident in our long-term growth despite current economic uncertainty. She adds that CN has the ability to drive strong operational results. The well-diversified portfolio is a competitive advantage due to the support of a solid customer base and supply chain partners.
At $155.49 per share (-2.36% year to date), the dividend yield is a modest but ultra-safe 2.08%.
A business of scale
After the successful transformative merger with Shaw Communications, Rogers Communications is now a $31.1 billion national cable, media, and wireless company. Its President and CEO, Tony Stafferi, said the about the merger, “This is a business of scale, and we can now deliver even more value for consumers and businesses on Canada’s largest and best national network.”
According to management, Rogers will fuel innovation and economic growth as the business combination adds $7 billion in gross domestic product (GDP) to the Western Canadian economy. At $58.41 per share (-6.29% year to date), the 5G stock trades at a discount and pays an attractive 3.48% dividend.
Pleasant spot
Pembina Pipeline, a stalwart in Canada’s oil and gas midstream industry, pays a hefty 6.37% dividend. The hefty yield can compensate for the energy stock’s temporary weakness due to declining oil prices. At $41.14 per share, the year-to-date loss is 7.68%. Market analysts forecast a 26.7% gain (average) in 12 months to $52.13.
Due the numerous growth projects, the $22.6 billion energy transportation and midstream services provider is in a pleasant spot right now. The most recent is Pembina’s collaboration with Marubeni Corporation to advance an end-to-end, low-carbon ammonia supply chain from Western Canada to Japan and other Asian markets.
Also, Pembina and Marubeni will jointly develop a world-scale, low-carbon hydrogen and ammonia facility in the Alberta Industrial Heartland. This TSX60 Index member hasn’t missed paying dividends since 1997, although the payout frequency is now quarterly instead of monthly.
Two-pronged approach
Building retirement wealth through dividend stocks is two-pronged. Grow your money first long term by reinvesting the dividends, and then earn passive income when you retire.
