Retired investors seeking to play it safe have plenty of passive-income options to select from this year as rates begin to peak. Indeed, it’s always nice to have more income coming from your dividend portfolios. But there’s a balance that must be met between risk and reward. In the case of retirees, that reward is often the dividend yield of a company rather than its capital gains potential.
Though share price appreciation is always important, many retirees likely prioritize dividend payments and the size of yields over a stock’s long-term growth prospects. When you’re in your golden years, it’s really nice to have as much cash coming in as possible to fund a comfortable, even somewhat lavish retirement.
In this piece, we’ll check out two “safe” passive-income stocks that retired investors may wish to give a second look as we pass the midpoint of January 2024. Though the following plays may be labelled as “safe,” retirees should know that market turbulence can spread to even the steadiest plays on the TSX Index or S&P 500. With that, be prepared to ride out the waves should the economic landing generate more than just a subtle splash!
Fortis
Fortis (TSX:FTS) stock has been quite the dud in recent years, with shares slumping on the back of this high-rate climate. Rates are bound to fall lower, and Fortis stock may be able to win the love of retired investors once again.
The single-digit growth rate is still on the table. And as rates get cut, I’d look for Fortis stock to break out to new all-time highs. For now, I view the utility stock as one of the cheapest, high-quality blue chips in the entire utility scene. With a 4.27% dividend yield and a modest 17.65 times trailing price-to-earnings multiple, FTS stock has to be atop the list of any income-seeking investors.
Sure, risk-free assets offer similar (if not better) rates without having to brave the market waters. However, when rates begin to retreat, good luck finding a 5% rate Guaranteed Investment Certificate (GIC) once it comes time to renew. In fact, GIC rates are already feeling the pressure, with rate cut expectations now on the minds of many.
Hydro One
Up next to the plate, we have Hydro One (TSX:H), a utility firm that has a monopoly over Ontario’s transmission lines. Indeed, monopolies are great to have, as barriers to entry help a firm secure cash flows in its markets of interest. For the sky-high stability, you’ll pay a higher price, though. At writing, H stock trades at 21.32 times trailing price to earnings, which seems more indicative of a growth stock than a Steady Eddie value stock with a dividend yield of around 3%.
In any case, I consider the premium worthwhile, especially if you’re fearful of the market consequences in a Canadian recession. For retired Canadian investors, H stock remains a great play to hold at your portfolio’s core for your golden years. Just be ready for some turbulence, as the stock has been known to swing wildly. If you’re not going to be tempted to sell at the first signs of negative momentum, however, H stock remains a great pick.
