If you are preparing for your retirement, we are sure your pensions are a crucial part of your retirement plan. For your day-to-day expenses, relying on your pension income might be good enough. However, the pensions available to Canadian retirees cannot fully cover their living costs in retirement.
Between the Old Age Security (OAS) and Canada Pension Plan (CPP) programs, you might cover around a third of your retirement income needs. For the rest, you must rely on the retirement nest egg you set up before your retirement. While saving your money in a cash savings account might make sense, leaving your savings idle only depreciates its value over the years due to inflation.
Instead of letting your money sit idle under a mattress, it will be better to put it to work and make more money for you. To this end, dividend investing can be an excellent part of your retirement plan. Today, we will look at two dividend stocks that can help you with your retirement plan.
Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS) is a $71.97 billion market capitalization Canadian bank stock. Headquartered in Toronto, the multinational banking and financial services company is the third-largest Canadian bank.
Due to its long and unbroken dividend-paying streak, Scotiabank stock is also a staple in many investment portfolios. For someone seeking reliable dividend income, Canada’s bank stocks make good picks. Among them, Scotiabank is attractive right now due to its high-yielding dividends.
As of this writing, Scotiabank stock trades for $59.71 per share, boasting a juicy 7.10% dividend yield. The downturn in its share prices due to broader market volatility has inflated its dividend yield to higher-than-usual levels. Investing in its shares while prices are down can help you lock in the inflated dividend yield to further your retirement planning goals.
Fortis
Fortis (TSX:FTS) is another mainstay in many investment portfolios. While belonging to a boring industry, Fortis stock is an excellent pick to consider for your retirement planning portfolio. Fortis is a $26.55 billion market capitalization utility holdings company.
Through several natural gas and electricity utility businesses in Canada, the U.S., Central America, and the Caribbean, Fortis provides essential services to millions of customers.
Most of Fortis’s revenue comes through long-term contracted assets in highly rate-regulated markets. It means that the company can generate predictable and stable cash flows.
Despite the heavy debt load weighing on its short-term profitability, Fortis stock is well positioned to continue growing its shareholder dividends. Fortis stock is a Canadian Dividend Aristocrat with a 50-year dividend-growth streak. As of this writing, it trades for $54.36 per share and pays investors a juicy 4.34% dividend yield.
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Foolish takeaway
While you are still earning, you can keep reinvesting the dividends you earn. This way, you can accelerate your wealth growth through the power of compounding.
Allocating a portion of your Tax-Free Savings Account to building and growing a dividend income portfolio can let you grow your wealth tax-free. When you retire, you can stop reinvesting the dividends and withdraw the money you need to supplement your pension accordingly.
Due to reliable dividend-paying streaks and long-term capital gains potential, Fortis stock and Scotiabank stock can be ideal foundations for your retirement-focused, self-directed investment portfolio.
