Retirees looking to give their passive-income stream a jolt have plenty of reasons to look beyond risk-free assets or fixed-income debt securities. Indeed, retired investors have been dealt a very tough hand since the coronavirus pandemic began. Not only did the 2020 stock market crash weigh heavily on the emotions of the retired, but the ensuing inflation and 2022 stock and bond market selloff seemed to be a historic punch to the gut.
Though it seems like a bad time to be a retiree in this market, I think there’s value to be had in certain stocks and real estate investment trusts (REITs), some of which sport dividend yields on the high side of the historic range. And in this piece, we’ll have a closer look at three passive-income plays that I think are top picks as we move further into the third quarter of 2023.
Consider shares of SmartCentres REIT (TSX:SRU.UN), Enbridge (TSX:ENB), and CIBC (TSX:CM), three great picks for retirees seeking more yield for their dollar! Though each stock, I believe, is undervalued, none of them are immune to downside risks that a Canadian recession could bring. The higher reward (yield and gains potential) may just be worth the risks you’ll have to take, however.
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SmartCentres REIT
SmartCentres REIT is a strip-mall REIT that’s been under pressure since peaking in early 2022. Shares are off around 25% from their March 2022 highs, with a yield that’s swelled to 7.4%. Indeed, you’re right to be skeptical about higher yields as a retiree. Who wants to be caught hanging on tumbling shares after a distribution cut? Nobody.
In any case, I think there’s already so much recession damage that’s in. New investors looking to get in at under $25 per share may be able to get a great bang for their buck. Though retail REITs are down and out, Smart is arguably one of the best of the batch, with the foot-traffic-driving presence of Walmart in many of its stores. I view the payout as reasonably safe, especially as Smart develops new residential and mixed-use properties.
Enbridge
Enbridge stock just dropped below $50 per share again, with a yield that’s still comfortably above 7% at around 7.2%. With solid second-quarter results in the books, I think it’s time that investors gave the firm more attention — not just for the yield but for its recovery prospects.
The firm reached an agreement with its Mainline pipeline. And with intriguing projects in the growth pipeline to look forward to, I think ENB stock is starting to become too cheap to ignore. The dividend isn’t just sustainable; it may be subject to further growth, as the company continues pushing for single-digit earnings growth over the foreseeable future.
CIBC
CIBC stock is down around 33% from its 2022 all-time high. Indeed, the recent wave of relief hitting some big banks has not jolted CIBC. Undoubtedly, the domestic mortgage exposure may be a concern to some as Canada’s economy is tested by a potential recession.
In any case, I think too much fear is priced in at current levels, with shares going for 10.8 times trailing price to earnings, with a 6.21% dividend yield.
Though CIBC isn’t my favourite bank stock, it is a dividend play to keep watch of going into year’s end. The stock seems to be forming some sort of bottom at around $56 per share. As to when shares will march higher again, though, remains to be seen.
