With no regular income to meet their expenses, retirees will have less appetite for risk. They intend to protect their capital while earning a stable passive income. So, the following three dividend stocks are perfect for retirees, given their solid underlying businesses, healthy cash flows, and high dividend yields.
Enbridge
Enbridge (TSX:ENB) is a midstream energy company that earns around 98% of its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) from cost-of-service contracts and regulated assets. Further, approximately 80% of its EBITDA is inflation-indexed. So, it enjoys stable and predictable cash flows, thus allowing it to pay dividends uninterruptedly since 1954. Also, the Calgary-based energy company has hiked its dividend at an annualized rate of 10% for the previous 29 years, with its forward yield currently at a juicy 7.46%.
Meanwhile, Enbridge’s management provided its 2024 adjusted EBITDA and DCF (distributable cash flows)/share guidance in November, with the midpoint of the guidance representing year-over-year growth of 4% and 3%, respectively. The projects put into service acquisitions worth $3 billion in 2023. Optimization of its base businesses could boost its financials and cash flows. Besides, the company hopes to grow its DCF/share at 3% through 2025 and 5% after that, making its future payouts safe. So, Enbridge would be an excellent buy for retirees.
Fortis
Another stable Canadian stock that retirees can buy would be Fortis (TSX:FTS), which operates a highly regulated utility business. Given the essential nature of its business, Fortis’s financials are less susceptible to market volatility. It has delivered around 510% returns over the previous 20 years at a CAGR (compound annual growth rate) of 9.5%. Further, the company has increased dividends for the last 50 years driven by its reliable performance. With a quarterly dividend of $0.59/share, FTS stock currently offers a healthy forward yield of 4.30%.
Further, Fortis has adopted a $25 billion capital investment plan, which could grow its rate base at an annualized rate of 6.3% through 2028. Amid these growth initiatives, management is confident of raising its dividend by 4-6% annually through 2028. Further, the company also strengthened its financial position by selling its stake in Aitken Creek Natural Gas Storage Facilities for $400 million.
BCE
Although last year was challenging for the telecom sector, I am picking BCE (TSX:BCE) as my final pick due to the growing demand for telecommunication services. Besides, telecom companies enjoy stable cash flows due to their recurring revenue streams. Also, the high initial investment and regulatory approvals have created entry barriers for new players, allowing existing players to protect their market share.
Supported by its stable financials, BCE has consistently increased its dividend by over 5% yearly for the previous 15 years. Also, with a quarterly dividend of $0.9675/share, its forward yield is currently at 7.1%.
Further, BCE is expanding its 5G, 5G+, and broadband infrastructure to grow its market share and drive its financials. Additionally, analysts expect central banks to cut their benchmark interest rates amid signs of easing inflation. Given its capital-intensive business, the company could benefit from interest rate cuts.
