After retirement, there will be no regular source of income. So, retirees should plan to earn a stable passive income to maintain the lifestyle they enjoyed before retirement. One of the easiest and most convenient ways to generate stable cash flows is by investing in high-yielding dividend stocks. The following two companies have raised their dividends consistently and pay dividends at healthier yields, thus making them attractive buys for retirees.
TC Energy
TC Energy (TSX:TRP) is a midstream energy company that has raised its dividends at an annualized rate of around 7% since 2000. The company generates approximately 95% of its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) from regulated assets and long-term contracts, thus producing predictable cash flows and facilitating consistent dividend growth. Meanwhile, it pays a quarterly dividend of $0.93/share, with its forward yield at 7.58%.
However, the midstream energy company has been under pressure over the last 12 months, losing about 10% of its stock value. Investors are worried about the losses caused by an oil spillage at its Keystone pipeline facility and rising interest rates, leading to a selloff in the stock. The selloff has dragged its valuation down to attractive levels, with its NTM (next 12-month) price-to-earnings multiple standing at 12.6.
Meanwhile, TC Energy is considering selling a 40% stake in the Columbia Gulf and Columbia Gas systems for $5.4 billion, which could help lower its debt levels. It is also working on spinning off its liquids pipeline business, which the company expects to complete in the second half of 2024. Further, the company continues its development initiatives and expects to put around $6 billion of projects into service this year.
With its growth initiatives, the company’s management hopes to grow its average funds from operations (AFFO) at a CAGR (compound annual growth rate) of 7% through 2026. So, the company’s management is confident of raising its dividends at an annualized rate of 3-5% in the coming years. Considering all these factors, I believe TC Energy would be an excellent buy for retirees.
Pizza Pizza Royalty
Pizza Pizza Royalty (TSX:PZA) would be another dividend stock that looks attractive for retirees due to its stable cash flows, irrespective of the market conditions. The company has adopted a highly franchised business model, collecting royalty from its franchisees based on their sales. So, rising commodity prices and wage inflations will not hurt its royalty income, thus delivering stable cash flows.
Meanwhile, the company has been delivering double-digit same-store sales growth in the first six months of this year, thanks to its menu innovations, strong value messaging, and promotional activities. The company has added 16 net restaurants over the previous four quarters, boosting its financials. Further, the company has planned to increase its restaurant count by 3-4% this year while continuing the renovation of its old restaurants. So, I expect the uptrend in its financials to continue.
Supported by its sold financials, Pizza Pizza Royalty has raised its monthly dividends seven times since April 2020. With a monthly dividend of $0.075/share, its forward yield stands at a juicy 6.47%. It trades 0.7 times analysts’ projected sales for the next four quarters, making it an attractive buy.
