Here’s the Average CPP Benefit at Age 70

Canadian retirees can consider supplementing their CPP payouts by investing in blue-chip dividend stocks such as RBC.

| More on:
Retirement

Image source: Getty Images

The Canada Pension Plan, or CPP, is a taxable retirement benefit that aims to replace a portion of your employment income in retirement. Generally, the average age Canadians start receiving the CPP is 65. But you can advance the payout and begin the CPP at 60 or delay it until the age of 70.

Now, why would you want to delay the CPP? Well, for every month the CPP is delayed, the payout will increase by 0.8% per month. It suggests, the CPP will increase by 42% for someone delaying the payout by five years.

The average CPP payout for a 65-year-old in 2024 is $758.32. So, for a 70-year-old, the average CPP payout will rise by 42% to $1,076.81. It’s evident that even if you delay the CPP by a few years, the benefit is not enough to lead a comfortable life in retirement.

Canadian retirees should build a sizeable nest egg and multiple income streams to supplement the CPP, resulting in a higher payout in retirement. One way to create a passive-income stream is by investing in quality high-dividend stocks such as Royal Bank of Canada (TSX:RY), which currently offers a forward yield of 4.1%. In addition to its tasty yield, investors will also benefit from long-term capital gains, as RY stock has risen by almost 90% in the past decade.

Is RBC stock a good buy right now?

Valued at $190 billion by market cap, Royal Bank of Canada is among the largest companies trading on the TSX. The Canadian banking sector is heavily regulated, allowing RBC and other big TSX banks to benefit from an entrenched position and steady market share.

It also means RBC has a conservative lending approach providing the giant with a strong business foundation and robust financials. While several banks in the U.S. were forced to cut, lower, and even suspend dividends amid the financial crash of 2008, RBC and its TSX peers easily maintained these payouts, showcasing the resiliency of their business models. In fact, RBC has paid shareholders a dividend every year since 1870, which is exceptional for a cyclical stock.

Several banks have underperformed the broader markets in the last two years due to rising interest rates, which have led to higher delinquency rates and a tepid lending environment. RBC ended the fiscal first quarter of 2024 with a CET1 (common equity tier-one) ratio of 14.9%. This ratio measures a bank’s ability to weather an economic downturn, and a higher ratio is preferred. In fact, RBC has the best CET1 ratio among all banks in North America.

RBC stock is quite cheap

Royal Bank of Canada pays shareholders an annual dividend of $5.52 per share. In the last 25 years, these payouts have risen at an annual rate of 10.3%, significantly enhancing the yield at cost.

Priced at 11 times forward earnings, RBC stock is very cheap and trades at a discount of 8% to consensus price target estimates.

A key earnings driver for RBC is its expansion efforts in the U.S., which is a highly fragmented market. Bay Street expects RBC to increase adjusted earnings by more than 6% annually in the next five years.

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 no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Dividend Stocks

hand using ATM
Dividend Stocks

Should Bank of Nova Scotia or Enbridge Stock Be on Your Buy List Today?

These TSX dividend stocks trade way below their 2022 highs. Is one now undervalued?

Read more »

A meter measures energy use.
Dividend Stocks

Here’s Why Canadian Utilities Is a No-Brainer Dividend Stock

Canadian Utilities stock is down 23% in the last year. Even if it wasn’t down, it is a dividend stock…

Read more »

edit Business accounting concept, Business man using calculator with computer laptop, budget and loan paper in office.
Dividend Stocks

Got $5,000? Buy and Hold These 3 Value Stocks for Years

These essential and valuable value stocks are the perfect addition to any portfolio, especially if you have $5,000 you want…

Read more »

Growing plant shoots on coins
Dividend Stocks

3 Magnificent Ultra-High-Yield Dividend Stocks That Are Screaming Buys in April

High yield stocks like BCE (TSX:BCE) can add a lot of income to your portfolio.

Read more »

grow money, wealth build
Dividend Stocks

1 Growth Stock Down 24% to Buy Right Now

With this impressive growth stock trading more than 20% off its high, it's the perfect stock to buy right now…

Read more »

Dividend Stocks

What Should Investors Watch in Aecon Stock’s Earnings Report?

Aecon (TSX:ARE) stock has earnings coming out this week, and after disappointing fourth-quarter results, this is what investors should watch.

Read more »

Freight Train
Dividend Stocks

CNR Stock: Can the Top Stock Keep it Up?

CNR (TSX:CNR) stock has had a pretty crazy last few years, but after a strong fourth quarter, can the top…

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Dividend Stocks

3 Stocks Ready for Dividend Hikes in 2024

These top TSX dividend stocks should boost their distributions this year.

Read more »