These 3 Canadian Dividend Stocks Are a Pensioner’s Best Friend

Dividend stocks allow retirees to generate an income without losing their capital, assuming they offer adequate capital appreciation and preservation over time.

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Income generation is an important part of retirement planning, especially for retirees who have already become pensioners. The CPP and OAS, even at their most generous levels, might not be enough to help a pensioner sustain a modest lifestyle.

Ideally, they can fill that gap with their savings in the right investments. If the savings are ample enough, parking them in the right dividend stocks and generating a consistent dividend income can greatly augment their pension. Three stocks can be a pensioner’s best friend in this regard.

A telecom stock

The Canadian telecom industry has three major and mature telecom businesses. While all three are worth considering for their dividends, Telus (TSX:T) stands out from the rest for several reasons, including the current discount it’s offering (25%). This has also pushed the yield up to an attractive level of 5.6%.

At this rate, the company can help a pensioner generate a sizable income, assuming a proportional sum is invested in the company. Even though it’s currently discounted, the stock has a decent history of long-term growth. Indeed, its capital appreciation potential, combined with its dividends, makes it a compelling buy for pensioners.

Even though the company’s primary business is telecom, it’s divesting and growing its business. This includes moves into a tech company, home security, and telehealth. These avenues can offer the company growth opportunities beyond the telecom sector.

A pipeline stock

TC Energy (TSX:TRP) is among the top energy stocks, particularly pipeline stocks in Canada. It controls both natural gas and oil pipeline assets across North America, though the primary focus is natural gas. The 93,300 kilometres of pipeline assets are spread across three countries – Canada, US, and Mexico. The company is also invested in power generation and has a production capacity of about 4.3 GW.

TRP is a compelling dividend stock, especially now that it’s trading at a 27.5% discount. This discount, even though it didn’t lead to the undervaluation of the stock, led to a decent boost in the dividend yield, which has been pushed up to 6.9%. In terms of capital appreciation potential, TC Energy might be a better pick than most other energy dividend giants.

A bank stock

Like most other bank stocks, the Canadian Imperial Bank of Commerce (TSX:CM) is a powerful dividend buy for many Canadian investors, including pensioners. The primary dividend strengths are a good yield and dividend sustainability. Currently, the stock is both discounted and almost undervalued.

CIBC’s yield is typically on the higher side compared to that of other bank stocks. And now that the stock has lost more than a quarter of its value from its 2022 peak, the yield has gone up to almost 6%. The capital appreciation has been stagnant in the last five years, but the stock may go up at a decent pace in a healthy bull market. This notion is endorsed by its growth after the great recession.

Foolish takeaway

All three dividend stocks are aristocrats, so pensioners might benefit from consistently growing dividends. This will help their dividend income stay ahead of inflation. The capital appreciation potential of the three blue-chip stocks is modest at best, but it might be enough to sustain the capital at a healthy level while producing dividend income for the pensioners.

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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends TELUS. The Motley Fool has a disclosure policy.

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