With no regular income, retirees are not keen on making high-risk, high-reward investments. They would prefer mature companies that generate stable cash flows irrespective of the broader market environment. Meanwhile, the following two stocks have consistently paid dividends for years and offer high dividend yields, thus making them an excellent buy for retirees.
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Enbridge
Enbridge (TSX:ENB) owns and operates pipeline networks transporting oil and natural gas across North America. It is also expanding its presence in natural gas utility and renewable energy spaces. With around 97% of its cash flows underpinned by cost-of-service and take-or-pay contracts, the Calgary-based midstream company has been generating stable financials irrespective of market conditions. Its average total shareholder returns have stood at 11.2% since 2004.
Supported by its stable cash flows and healthy growth, the company has been paying dividends for 69 years. It has raised its dividend for 29 consecutive years, with its forward yield at 7.57% as of the March 9th closing price.
Further, Enbridge is continuing its $24 billion secured capital program and expects to put $4 billion of capital into service annually this year and next. It also recently completed the acquisition of East Ohio Gas Company and is working on closing two other acquisitions of natural gas utility assets, which it had announced in September. It has divested certain assets and raised $4 billion by issuing additional shares to fund these acquisitions.
After completing these acquisitions, the company would become North America’s largest natural gas utility platform. The increased cash flows from high-quality, low-risk utility assets could further strengthen its financials. Rising oil production in Western Canada could increase Enbridge’s Mainline utilization rate to 99% by 2026. Considering all these factors, I believe its growth prospects look healthy.
Its financial position also looks healthy, with its debt-to-equity ratio at 4.1 and liquidity at $23 billion. Given its excellent growth prospects, solid underlying businesses, and healthy financial position, I believe the company’s future dividend payouts will be safer. Also, its price-to-sales multiple stands at 17.2, making it an attractive buy.
Telus
Another top dividend-paying stock that I am bullish on is Telus (TSX:T), which has been raising its dividends since 2004. It currently pays a quarterly dividend of $0.3761/share, with its forward yield currently at 6.44 as of the March 8th closing price. Telecom companies enjoy a stable cash flow due to their recurring revenue source. Huge initial investments and regulatory barriers have allowed existing players to protect their market share and drive growth.
Meanwhile, telecommunication services have become essential in this digitally connected world, thus expanding the company’s addressable market. In November, the Vancouver-based telco acquired several spectrum licenses for $620 million, which could allow it to expand its 5G services across the country. The growing customer base and focus on improving its cost efficiency could boost its financials in the coming quarters.
Further, Telus could also witness higher contributions from its growth segments, such as Telus Health and Agriculture & Consumer Goods, driving its financials. The growing adoption of telehealthcare services and improving synergies between the company and LifeWorks could boost the financials of the Telus Health segment. Amid these growth initiatives and stable cash flows, Telus’s management is confident of maintaining its dividend growth of 7-10% annually through 2025. Considering all these factors, I believe Telus is an excellent buy for retirees.
