Pensions are for life, but some retirees want more because they can’t fully support financial needs in old age or a comfortable retirement. If you’re investing in Canadian stocks for additional income in the sunset years, stick to heavyweight sectors like banking and energy.
The Royal Bank of Canada (TSX:RY) and Enbridge (TSX:ENB) are big guns in their respective sectors and excellent sources of pension-like income. You can buy this pair of blue-chip stocks and hold them forever.
If you invest today (not more than $200 per share combined), the average dividend yield is 5.7%. A $100,000 investment in each will balloon to $458,710.57 in 15 years, including reinvestment of dividends. Assuming the yields remain constant, you’ll receive $6,525.15 in quarterly passive income for decades.
Dividend longevity
RBC is a no-brainer buy for three compelling reasons. The $209.7 billion bank is Canada’s largest financial institution. Its dividend track record is 154 years and counting. Last, the dividend yield is not the highest in the market, but you have peace of mind. At $148.21 (+12.9% year-to-date), the dividend offer is 3.8% (50% payout ratio).
Canada’s banking sector is envied globally because many consider it a bedrock of stability. RBC’s income has been generally stable regardless of the economic environment. The average net income in the last three fiscal years is $15.6 billion.
In the first half of fiscal 2024 (six months ended April 30, 2024), total revenue and net income rose 7.1% and 10.6% year-over-year to $27.6 billion and $7.5 billion, respectively. Notably, net income was $50 million lower following the completion of the acquisition of HSBC Bank Canada in late March 2024.
Its President and CEO, Dave McKay, said acquiring HSBC Canada is a pivotal milestone in RBC’s long-term growth story. He adds that RBC has the right strategy to continue building for the future and competing globally. Many market analysts agree that the $13.5 billion deal could provide significant growth and efficiency opportunities.
“This once-in-a-generation opportunity will show Canadians how our combined organization will deliver an enhanced banking experience, create better value for clients and strengthen our communities, McKay added. However, Canadian big banks might face a wave of mortgage renewals in the next few years and higher monthly payments for borrowers.
Dividend powerhouse
Enbridge is the fifth-largest TSX company by market cap. The $103.1 billion energy infrastructure company’s dividend track record pales compared to RBC, but this top-tier energy stock is a dividend aristocrat owing to 27 consecutive years of dividend increases. At $48.49 per share (+5.6% year-to-date), the dividend yield is 7.6%.
Income investors love Enbridge for its long history of predictable financial and operational performance, plus a low-risk business model. Four core franchises (liquids pipelines, gas transmission, gas distribution, and renewable) are growth catalysts and revenue contributors.
Its President and CEO, Greg Ebel, said, “Enbridge remains committed to delivering long-term shareholder returns supported by stable, diversified, utility-like earnings.” He added that the company has returned around $34 billion to shareholders through paid common dividends over the past five years and expects more than $40 billion in dividend payments in the next five years.
Fabulous investments
Future retirees can be safe investing in the Royal Bank of Canada and Enbridge. The fabulous pair can deliver income for life, similar to pensions.
