Between the Canada Pension Plan (CPP), Old Age Security (OAS) program, and employer-funded pensions, Canadians have plenty of income streams to fall back on during their retirements. Combine that with a solid retirement plan that can provide them with additional retirement income, they can even retire earlier without worrying about money.
Smart retirement planning also involves putting your money to work and earning more off of it. One of the best strategies to achieve that goal is through dividend investing. Buying and holding the right Canadian dividend stocks can provide a substantial boost to setting up a retirement nest egg and creating a passive-income stream to supplement their pensions.
For a self-directed portfolio to successfully boost your retirement income, you must identify and invest in dividend stocks capable of delivering returns in the long run. Today, we will look at two top Canadian dividend stocks you can consider for this purpose.
Telus
Telus (TSX:T) is a $35.05 billion market capitalization giant in the Canadian telecom industry. The Vancouver-based company offers a litany of subscription-based offerings to customers spread nationwide, including wireless and wired internet, and TV.
Telecoms offer a crucial service, ensuring connectivity for all their customers. Regardless of what happens in the market, telecoms are considered defensive businesses due to the essential nature of their services. With hybrid and remote work an integral part of the workforce since the pandemic, the demand for high-quality internet connectivity has increased even further.
The nature of its industry, good management, and an ever-growing demand for its services make Telus stock a reliable income-producing stock. As of this writing, Telus stock trades for $24.10 per share, paying its shareholders quarterly at a 6.24% dividend yield. If you are looking for a long-term investment as part of your retirement plan, Telus stock can be an excellent stock to consider.
Fortis
Fortis (TSX:FTS) is a $27.40 billion market capitalization stock that needs little introduction for seasoned Canadian stock market investors. The multi-billion-dollar Canadian utility holdings company owns and operates several natural gas and electricity utility businesses in Canada, the U.S., Central America, and the Caribbean.
Historically, utility businesses have always been regarded as boring businesses. When the economy goes through a good period, these companies offer little upward movement in share prices. However, the stability in share prices comes into play as a positive aspect when markets go down. The essential nature of their services makes them resistant to recessionary markets.
Fortis operates primarily in highly rate-regulated markets with long-term contracts. It means the company generates stable and predictable cash flows that fund its capital plans and grows shareholder dividends comfortably.
As of this writing, Fortis stock trades for $56.10 per share, paying its investors at a 4.21% dividend yield. To top it all off, it is a Canadian Dividend Aristocrat that has increased its payouts for 50 years. It can be a safe investment for a retirement income portfolio.
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Foolish takeaway
By buying and holding dividend stocks in your self-directed portfolio, you can earn additional income through payouts. In the years leading up to your retirement, you can reinvest the dividend income to accelerate your wealth growth through the power of compounding. When you retire, you can start using the increased dividend income to supplement your pensions in retirement.
Telus stock and Fortis stock are both excellent dividend stocks for this purpose. If I were to choose between the two, I would go with Fortis stock due to its status as a Canadian Dividend Aristocrat and its ability to virtually guarantee predictable and stable cash flows through its business model.
