The Canada Pension Plan Investment Board (CPPIB) assures contributors to the Canada Pension Plan (CPP) that everyone will have a secure financial base in retirement. However, the CPP fund manager reiterates the pension isn’t a retirement plan but will help seniors retire in place.
A pensioner will receive at least 25% of average work earnings (33% for contributors in 2019 and after) but will be responsible for filling the income gap. Many future retirees generate extra funds or additional retirement income by investing in dividend stocks.
First National Finance (TSX:FN) and Cogeco (TSX:CGO) can help boost your CPP because of their generous payouts. If you invest today, the average dividend yield of these dividend juggernauts is 5.84%. Accumulate more shares by reinvesting the dividends to build a nest egg, then draw them in retirement to augment your CPP.
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Solidly profitable
The rapid rise of interest rates is the root cause of the housing market downturn. Peter Routledge, the Superintendent of the Office of the Superintendent of Financial Institutions (OSFI), said the financial regulator is preparing for the possibility that the housing market will experience sustained weakness through 2023.
First National Finance originates, underwrites, and services prime residential (single-family and multi-unit) and commercial mortgages. While the $2.27 billion non-bank lender notes the lower mortgage origination in 2023, management said the business remains solidly profitable.
Its president and chief executive officer (CEO) Jason Ellis added that First National’s long-term securitization strategy creates five- and 10-year income streams. Meanwhile, the company is patiently waiting for the return of a healthier, more sustainable housing market. In the first quarter (Q1) of 2023, revenue increased 23% to $432.1 million versus Q1 2022, although net income declined 33.4% year over year to $35.7 million.
Still, Ellis said the first-quarter results reflect the strength and resiliency of the business. Every year since 2018, revenue and mortgage under administration (MUA) have been consistently growing. First National derives most of its earnings from MUA, which reached a record $131 billion in 2022. The net income in the same year was a record $197.7 million.
At $37.97 per share, current investors enjoy a 7.58% year-to-date gain on top of the juicy 6.32% dividend. According to management, First National has paid $1.9 billion in dividends ($31.67 per share) from 2006 to 2022.
Profit generator
Cogeco trades at a discount ($55.87 per share and -9.83% year to date), but the 5.36% dividend yield compensates for the temporary weakness. The $872.67 million corporation provides broadband services to Canadians and Americans through Cogeco Communications. Cogeco Media is one of Quebec’s leading radio broadcasters.
The telco stock hasn’t missed paying a quarterly dividend since February 2009, and payouts are increasing. Cogeco is small compared to Canada’s telco giants, although it’s a growing competitive force in North America’s telecommunications and media sector.
Cogeco is a profit generator, as evidenced by the average net income of $140.55 million from 2019 to 2022.
CPP boosters
The high dividend yields of First National and Cogeco can boost a CPP significantly. However, the latter (+441.86%) is the better choice over the latter (+69.94%) if the overall return in 10 years is the basis.
