How to Create a Dividend Income Stream for Retirement With 3 Stocks

Dividend stocks like 7% yielding Enbridge can help set you up with a reliable and lucrative retirement income.

| More on:
A plant grows from coins.

Source: Getty Images

Like it or not, retirement sneaks up on us faster than we think it will. If it’s fast approaching for you, I’ve got a way for you to create a generous retirement dividend income stream. Here are three dividend stocks to buy in support of your retirement hopes and dreams.

Enbridge: A 7.24% dividend yield to help fund your retirement

As one of North America’s leading energy infrastructure companies, Enbridge Inc. (TSX:ENB) has shown us the power of this business. Essentially, it’s a business that provides reliable, predictable, and growing cash flows over time. This is what makes Enbridge an ideal dividend stock. It’s also what makes it one of the stocks I’m recommending to create a healthy dividend income stream for retirement.

So, in order to help you gain more confidence in Enbridge, let me highlight the company’s dividend history. Enbridge stock has 28 years of annual dividend increases under its belt. During this time period, its annual dividend has grown at a CAGR of 7.25%, to the current $3.55 per share. Essentially, the dividend today is 1,320% higher than it was in 1995.

Looking ahead, I see more of the same for Enbridge stock and its dividend. This is because its business deals are long-term and contracted. In fact, 98% of Enbridge’s cash flow is contracted. Also, 95% of Enbridge’s customer base is investment grade. Lastly, 80% of Enbridge’s EBITDA is inflation-protected. And as Enbridge increasingly invests in renewable energy, the company is operating along the same principles, thereby ensuring staying power.

Fortis: Predictable and certain

As far as dividends go, we can say that nothing is technically certain. But Fortis Inc. (TSX:FTS) is pretty close. Fortis is a $27 billion utility giant with a diverse geographic footprint and asset mix. Utilities are regulated. They’re predictable. And they’re an essential service. This is why Fortis’ dividend has also been so predictable and reliable.

You see, Fortis has a 49-year history of dividend growth. Also, in the last 28 years, Fortis’ dividend has grown at a compound annual growth rate of 6.2%, from $0.42 per share to the current $2.26 per share. It’s almost 440% higher today than it was back in 1995. The latest dividend increase was a 5.6% increase this year, and the company expects dividend growth in the range of +4% to +6% until 2027.

So, as you can see, Fortis’ business is really supportive of a dividend that we can rely on in our retirement.

Northwest Healthcare Properties: A dividend yield of over 10%

With a dividend yield of 10%, Northwest Healthcare Properties REIT (TSX:NWH.UN) certainly has the ability to power your retirement in a big way. But, of course, anytime we see a dividend yield that’s so high, we must also pay close attention to possible risks.

In Northwest Healthcare’s case, the risk lies in the company’s high debt-load. This is a real risk, but there are some mitigating factors that leave me comforted. Firstly, Northwest is the owner and operator of health care properties around the world, and this is a highly defensive business. Secondly, the company’s buildings are characterized by long-term tenancy, with a weighted average lease expiry of 14 years. Finally, Northwest Healthcare’s revenues are inflation-indexed.

So, we can see that this business is defensive in so many ways. This is what makes me comfortable owning the stock. In my view, the benefit of its 10%-plus dividend yield is greater than the downside risk. It’s a calculated risk I consider worth taking.

Motley Fool: The bottom line

In summary, these three dividend stocks can create a very attractive retirement income stream. Investing a total of $100,000 equally between these stocks would give you $7,223 in annual dividend income. This equates to $601 per month.

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.

Fool contributor Karen Thomas has a position in Enbridge and Northwest Healthcare Properties. The Motley Fool recommends Enbridge, Fortis, and NorthWest Healthcare Properties Real Estate Investment Trust. The Motley Fool has a disclosure policy.

More on Dividend Stocks

investment research
Dividend Stocks

2 TSX Stocks to Buy in 2024 and Hold for the Next 10 Years

Are you looking for some great TSX stocks to buy in 2024? The market is full of options, but these…

Read more »

Dividend Stocks

Pensioners: 2 Stocks That Cut You a Cheque Each Month

Monthly pay dividend stocks like First National Financial (TSX:FN) cut you a cheque each month.

Read more »

money cash dividends
Dividend Stocks

Want Decades of Passive Income? 2 Energy Stocks to Buy Now and Hold Forever

Are you wondering what TSX energy stocks could pay and grow their dividends for decades ahead? Here are two for…

Read more »

The sun sets behind a power source
Dividend Stocks

2 No-Brainer Utilities Stocks to Buy Right Now for Less Than $200

These two utilities stocks can be some of the best picks for investors if you want to shell out some…

Read more »

financial freedom sign
Dividend Stocks

Million-Dollar TFSA: 1 Way to Achieve to 7-Figure Wealth

Achieving seven-figure TFSA wealth is doable with two large-cap, high-yield dividend stocks.

Read more »

analyze data
Dividend Stocks

How Much Will Manulife Financial Pay in Dividends This Year?

Manulife stock's dividend should be safe and the stock appears to be fairly valued.

Read more »

food restaurants
Dividend Stocks

Better Stock to Buy Now: Tim Hortons or Starbucks?

Starbucks and Restaurant Brands International are two blue-chip dividend stocks that trade at a discount to consensus price targets.

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Dividend Stocks

1 Growth Stock With Legit Potential to Outperform the Market

Identifying the stocks that have outperformed the market (in the past) is relatively easy, but selecting the ones that will…

Read more »