Developing a healthy and reliable income stream is important to retirement planning. In most cases, the goal of this income stream is to augment the government pensions you are expected to receive as a retiree and beef them up to an adequate level to maintain a good lifestyle.
Some investors rely upon assets like rental properties for this income stream, but dividend stocks are a valid and viable option for most investors. Three dividend stocks should be on your radar if you are looking for a reliable and worry-free retirement income stream that is not too vulnerable to weak market conditions.
A mortgage company
While small-cap dividend stocks do not inspire a lot of confidence in investors, MCAN Mortgage (TSX: MKP) may be treated as an exception. This small mortgage company is offering a highly attractive yield of 9.3%, backed by a relatively healthy payout ratio of 74%. The company has also been raising its payouts for some time now and releases generous special dividends yearly (hence, the yield).
At this yield, the stock can help you generate an income of about $310 monthly. If you manage to hold it long enough, the stock might sustain the capital you have invested in the company or even grow it to a modest level, but its dividends remain its primary attraction, although right now, the value is quite attractive as well.
A utility stock
If you are looking to couple reliable dividends with modest capital growth potential, Capital Power (TSX: CPX) is a stock worth considering. It combines the safety of the utility sector with the reliability of a dividend aristocrat. As for the growth potential, the stock has experienced an 88% price appreciation in the last 10 years, which is enough to keep your capital from degrading under the influence of inflation.
This Edmonton-based company still relies quite heavily on natural gas for power production. It’s significantly cleaner than oil or coal and offers more reliability than renewables that are subject to environmental factors. Still, the utility is diversifying its portfolio and aiming for net zero by 2045. At its current yield of 6.2%, the company can offer you about $200 a month with $40,000 invested.
An energy company
The energy sector in Canada is full of decent dividend stocks, but few names stand out as much as Enbridge (TSX: ENB), the largest company in the energy sector (by market cap) and one of the largest pipeline companies in the world.
Since Enbridge is responsible for moving a substantial portion of the oil and gas produced (and consumed) in North America, the long-term financial prospects of the company remain healthy.
Enbridge is typically one of the most generous dividend aristocrats in Canada, but the yield has become more attractive thanks to the 18% discount the stock is trading at right now. At its 7.3% yield, the company can help you generate a monthly income of about $240 if you have $40,000 to invest.
Also, while Enbridge may not offer decent capital appreciation potential, it’s also less susceptible to negative trends in the sector compared to upstream and downstream energy stocks.
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Foolish takeaway
If you can divert about $120,000 of your retirement savings to these three companies, they can help you generate a reliable dividend income of about $750 per month. That can help you take care of several routine expenses as a retiree. Raising the required capital in a TFSA and stashing the three stocks there can also make this income tax-free.
