Retirement planning has become increasingly difficult in recent years due to the much higher cost of living than in the last few generations. What might have been an excellent amount to retire 30 years ago will likely not cut it for someone retiring a few years from now. Fortunately, stock market investing provides a better chance to grow your wealth and safeguard your retirement.
Investing in the stock market has the potential to deliver far greater returns than high-interest savings accounts. Despite key interest rates being high, they pale in comparison to what you can earn by investing in dividend stocks.
High-quality dividend stocks offer an easy and convenient way to fuel your retirement fund without adding unnecessary risk. Strong businesses, consistent payouts, and stable cash flows that fund them make top-notch dividend stocks excellent long-term investments for risk-averse retirees. To this end, here are my top three picks to build a good retirement-focused portfolio.
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Enbridge
Enbridge (TSX:ENB) is a $102.58 billion market capitalization pipeline and energy company headquartered in Calgary.
The midstream giant in the energy industry has been transporting a significant portion of all hydrocarbons produced and consumed in North America through its extensive infrastructure. Generating revenue based on volume instead of the value of commodities, it has remained relatively immune to volatile oil and gas prices.
Enbridge generates almost all of its adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) through long-term contracts, with 80% of its EBITDA being inflation-indexed.
It means the company enjoys solid and stable cash flows to support its dividends which it has hiked for the last 29 years. As of this writing, Enbridge stock trades for $48.25 per share and boasts a juicy 7.59% dividend yield.
Fortis
Fortis (TSX:FTS) is one of the best dividend stocks on the TSX and is another staple in many investment portfolios. The $26.38 billion market capitalization utility holdings company owns and runs several gas and electricity utility businesses, serving customers across Canada, the U.S., Central America, and the Caribbean.
Providing an essential service, Fortis is a defensive stock resistant to the effects of recessions and harsh economic environments. While interest rate hikes took a toll on its financials, the company generates most of its revenue through long-term contracted assets and can comfortably fund its growing dividends.
As of this writing, it trades for $53.51 per share, boasting a 4.41% dividend yield. One of two Canadian Dividend Kings with a 50-year dividend-growth streak, it can be an excellent bet for income-seeking retirees.
Canadian Natural Resources
Canadian Natural Resources (TSX:CNQ) is another favourite pick for income-seeking investors. The $104.82 billion market capitalization is a senior Canadian oil and natural gas company headquartered in Calgary.
It runs a solid business that supports the dividends it has paid to shareholders for over 20 years and has increased them at a 21% compound annual growth rate (CAGR) of 21% over the last 24 years.
Boasting efficient operations, a disciplined capital-allocation strategy, and the potential to grow production, it also has high-value reserves to keep it going for decades.
The company plans to invest around $5.4 billion this year to grow its asset base further. As global energy demand grows, it can deliver substantial growth for years to come. As of this writing, CNQ stock trades for $49.07 per share and boasts a 4.28% dividend yield.
Foolish takeaway
By building a sizeable portfolio of dividend stocks, you can grow your wealth significantly through capital gains and dividend income. Using dividend-reinvestment programs and purchasing more shares of each high-quality stock can help you unlock the power of compounding to accelerate your wealth growth.
If you build such a portfolio in a Tax-Free Savings Account, it can help you enjoy the returns without incurring capital gains or income tax when you retire. These three dividend stocks can be excellent foundations for such a portfolio.
