Dividend Powerhouses: Stocks to Supercharge Your Retirement Savings

Top TSX dividend stocks are now on sale.

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Canadians are looking for good investments for their self-directed Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP) portfolios. One popular strategy for generating retirement income and getting attractive total returns on savings involves owning top TSX dividend stocks.

Best dividend stocks for retirees

Retirees want to own stocks that deliver reliable and growing passive income. The steep rise in living costs in the past few years is driving investors to seek out higher yields. In the current market conditions, many top TSX dividend stocks now trade at discounted prices and offer yields that are above rates paid by Guaranteed Investment Certificates (GICs).

Enbridge (TSX:ENB) is a good example of a Canadian dividend stock with a good track record of raising the payout while offering a high yield. The board increased the dividend in each of the past 28 years. At the time of writing, ENB stock provides a 7.5% dividend yield.

The company is working on a $17 billion capital program that should support revenue and cash flow growth as new assets go into service. Enbridge is also large enough that it can make strategic acquisitions to complement the internal projects.

The stock trades near $47 per share right now compared to more than $59 at the 2022 high, so investors can buy the dip and have a shot at decent upside when the market recovers.

Best dividend stocks for younger investors

Investors in the early or middle parts of their careers are generally looking to build retirement portfolios that can provide income down the road. In this situation, people often hold good dividend stocks inside a self-directed RRSP or TFSA and use the distributions to buy new shares.

The compounding process can turn modest initial investments into large savings over time. This is particularly true when the dividend increases at a steady pace and the stock price drifts higher.

Many companies offer discounts on the shares when dividends are used to buy more stock. The dividend-reinvestment plan (DRIP) can normally be set up through an online brokerage account. Even a 2% reduction in the share price can make a big difference over the long run.

Fortis (TSX:FTS) might be a good stock to consider for investors who are looking for total returns. The utility company has increased its dividend annually for 49 years and expects to boost the payout by 4% to 6% per year through at least 2027.

Fortis is working on a $22.3 billion capital program that will significantly increase the rate base over five years. Nearly all of the revenue comes from rate-regulated assets that include power-generation facilities, electric transmission networks, and natural gas distribution utilities.

At the time of writing, investors can get a 4.2% dividend yield from FTS stock. The shares trade below $54 compared to more than $64 at one point last year.

The bottom line on top stocks for retirement investors

Enbridge and Fortis have long track records of dividend growth and should continue to increase their payouts. If you have some cash to put to work in a TFSA targeting passive income or a self-directed RRSP focused on total returns, these stocks look cheap today and deserve to be on your radar.

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.

The Motley Fool recommends Enbridge and Fortis. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker owns shares of Enbridge.

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