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.

| More on:
Senior Couple Walking With Pet Bulldog In Countryside

Image source: Getty Images.

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.

More on Dividend Stocks

Early retirement handwritten in a note
Dividend Stocks

Retire Early With These 3 Canadian Passive-Income Stocks

Three Canadian passive-income stocks are smart choices for people with early retirement goals.

Read more »

Dividend Stocks

3 Dividend Deals You Won’t Want to Miss

Given their solid underlying businesses and stable cash flows, I believe three dividends stocks would be an excellent addition to…

Read more »

A worker gives a business presentation.
Dividend Stocks

For 6% Yields, Buy These 3 TSX Stocks Now

Companies like Enbridge offer high yields and are focused on elevating their shareholders’ value by bolstering dividend distributions.

Read more »

protect, safe, trust
Dividend Stocks

How to Invest $10,000 Today for Decades of Safe Passive Income

Want to earn safe and predictable passive income? Here are some ideas on how to invest $10,000 and earn +$400…

Read more »

protect, safe, trust
Dividend Stocks

Turn $15,000 Into Your Financial Safety Net

You can turn limited capital into a financial safety net by purchasing a high-yield stock paying monthly dividends.

Read more »

TIMER SAYING TIME FOR ACTION
Dividend Stocks

Brookfield Stock: It’s Time to Buy the Dip

Brookfield (TSX:BN) stock is getting cheap. The time has come to buy the dip!

Read more »

alcohol
Dividend Stocks

How to Earn $14,000 Per Year in Tax-Free Income and Maximize Your CPP Payout

The difference between the maximum and average CPP payout is $1,094/month. To collect the maximum CPP, you need an alternate…

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

Revealed: How to Get $3,000/Year in Tax-Free Dividends

TFSA investors can get $3,000 a year in tax-free dividends, but it would take almost eight years due to annual…

Read more »