Can you plan your retirement by investing in stocks? Is there a risk of losing your retirement savings in a downturn? These concerns discourage many people from investing in stocks, and they stick to term deposits. However, the TSX has some good Dividend Aristocrats with decades of dividend-paying history. They might be riskier than fixed deposits, but they can help you build inflation-adjusted passive income.
A top dividend stock to build quarterly passive income for retirement
While planning for retirement, you can build multiple income streams for your expenses. For instance, one investment can be dedicated to your broadband bills, one to utility bills, and one to groceries. If 50% of your daily expenses are met by your Registered Retirement Savings Plan (RRSP) passive-income portfolio, you can focus your Tax-Free Savings Account (TFSA) on generating wealth.
The golden rule of investing is keeping it simple. If your telecommunications bill is around $200/month, you can invest in a dividend-paying telecom company that will pay your future bills. A good telecom stock is Telus (TSX:T).
Telus already has strong customer outreach and sustainable subscription revenue, which generates strong cash flows. It is investing in the 5G infrastructure to tap the next telecom revolution. The company has been growing its dividend every six months, resulting in an annual dividend growth of 7%.
The high interest rate and accelerated capital spending affected Telus’s free cash flow and increased its dividend-payout ratio to 91% in 2023. Despite this, the company increased its 2024 dividend by 7%. This high payout ratio is temporary. Interest rate cuts and growth in subscription revenue from the expanded network will boost future cash flow and balance the payout ratio in the long term.
Why invest in this stock?
Telus has been growing its dividend for 20 consecutive years. You can use this stock to build your passive-income pool for telecom services.
The telecom industry is undergoing a transition on the technology and regulatory front. The regulator has asked Telus to open its infrastructure to competitors in certain areas. It could materially impact the company’s competitive advantage unless this access is conditional. These concerns have reduced the stock price of Telus to below $22, a 29% discount from its normal trading price. Now is an opportune time to lock in a 7.2% dividend yield.
Buy 1,297 shares of Telus for $898 in quarterly passive income
A $10,000 investment can buy you 720 shares of Telus at $22 per share. Six months have already passed. Hence, 720 shares will give you two quarterly payouts of $0.3891 dividend per share in 2024. That brings the total dividend income for the remainder of 2024 to $560.
| Telus Stock Price | Year | Telus DRIP Shares | Telus Share count | Telus Dividend per share (6% CAGR) | Telus dividend |
| $22.00 | 2024* | 720.0 | $1.5304 | $1,101.89 | |
| $30.00 | 2025 | 36.73 | 756.7 | $1.6222 | $1,227.58 |
| $30.00 | 2026 | 40.92 | 797.6 | $1.7196 | $1,371.60 |
| $30.00 | 2027 | 45.72 | 843.4 | $1.8227 | $1,537.24 |
| $30.00 | 2028 | 51.24 | 894.6 | $1.9321 | $1,728.47 |
| $30.00 | 2029 | 57.62 | 952.2 | $2.0480 | $1,950.18 |
| $35.00 | 2030 | 55.72 | 1007.9 | $2.1709 | $2,188.15 |
| $35.00 | 2031 | 62.52 | 1070.5 | $2.3012 | $2,463.30 |
| $35.00 | 2032 | 70.38 | 1140.8 | $2.4392 | $2,782.78 |
| $35.00 | 2033 | 79.51 | 1220.4 | $2.5856 | $3,155.32 |
| $35.00 | 2034 | 90.15 | 1310.5 | $2.7407 | $3,591.72 |
Telus offers a dividend-reinvestment plan (DRIP) that allocates DRIP shares your total dividend income can buy for no brokerage. The next dividend income is calculated on your 720 shares plus DRIP shares.
Assuming Telus’s average stock price of $30, your $560 dividend will buy 18.68 DRIP shares. If Telus continues to grow its dividend by 6% annually, your 738.7 Telus shares can grow your passive income to $1,198 in 2025. All things remaining constant, your $10,000 investment will keep compounding and grow your Telus share count to 1,279 by 2034. Ideally, you only paid $10,000 to own these shares. If you were to buy 1,279 shares today, you had to shell out around $28,000.
A one-time investment of $10,000 today can start paying your broadband bills from 2034 onwards, with a quarterly payout of $876.
