Retirees: Is CPP Enough to Live on?

Here’s how investing in blue-chip, high-yield TSX dividend stocks can help you supplement the CPP in 2024.

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The Canada Pension Plan, or CPP, was introduced more than five decades back to help residents replace a portion of their taxable income in retirement. In 2024, the maximum CPP payout for a 65-year-old is $1,364.60, while the average payout is much lower at $758.32. Comparatively, on average, Canadian households would need close to $4,000 each month to lead a comfortable life in retirement.

It’s evident that just relying on the CPP during retirement is not advisable. You need to supplement the pension plan with additional sources of income. A low-cost way to begin a passive-income stream is by investing in blue-chip dividend stocks.

Here are two TSX dividend stocks you can buy and supplement the CPP in retirement.

Manulife Financial stock

Valued at $59 billion by market cap, Manulife Financial (TSX:MFC) is among the largest companies in Canada. It pays shareholders an annual dividend of $1.60 per share, translating to a forward yield of almost 5%.

Despite an uncertain macro environment, Manulife recorded double-digit, top-line growth with record APE (annual premium equivalent) sales. Its stellar performance allowed Manulife to grow core earnings by 17% while the return on equity stood at 15.9%, in line with the company’s medium-term target.

Moreover, Manulife’s adjusted book value per share grew by 9% while its LICAT (life insurance capital adequacy test) ratio stood at 137%. Generally, a LICAT ratio of more than 100% is favourable.

Asia was a key region for Manulife, where it saw double-digit growth across new business metrics. In 2023, Manulife acquired CQS, a company with multisector alternative credit capabilities. The acquisition is expected to complement Manulife’s fixed-income and multi-asset solutions business.

Manulife generated remittances of $5.5 billion and returned $4.3 billion of capital to shareholders via dividends and buybacks. Priced at 8.8 times forward earnings, Manulife stock is very cheap, given its earnings are forecast to rise by 11.7% annually in the next five years.

Moreover, Manulife is a dividend-growth stock that has raised payouts by almost 12% annually in the last decade.

Brookfield Renewable Partners stock

Down 50% from all-time highs, Brookfield Renewable (TSX:BEP.UN) offers you a tasty dividend yield of 6.2%. The pullback in the last two years has been largely driven by rising interest rates and inflation, driving shares of capital-intensive companies lower.

Brookfield Renewable is among the largest clean-energy companies in the world that offers it a wide competitive moat and predictable earnings. Its resilient cash flows have enabled BEP to increase dividends by at least 5% annually in the last 13 years. Going forward, it expects dividends to increase between 5% and 9% each year.

Brookfield’s long-term power-purchase agreements are indexed to inflation, allowing it to increase funds from operations, or FFO, per share by at least 2% each year. Additionally, its focus on margin enhancements will translate to annual growth of roughly 3%, while a robust pipeline of development projects will power cash flow expansion by 3-5%.

Analysts remain bullish on BEP stock and expect it to gain 26% in the next 12 months.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Aditya Raghunath has positions in Brookfield Renewable Partners. The Motley Fool recommends Brookfield Renewable Partners. The Motley Fool has a disclosure policy.

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