Canadian retirees should ensure that they have multiple income streams in retirement, given the average CPP (Canada Pension Plan) payout in 2024 is $816.52 for a 65-year-old starting this payment. One low-cost way to ensure a steady stream of recurring income is by investing in quality dividend stocks. As dividend payments are not guaranteed, it is crucial to identify a portfolio of companies with a sustainable payout ratio and the ability to generate stable cash flow across business cycles.
Here are two dividend stocks retirees can use to supplement their CPP payments in 2024.
Tourmaline Oil stock
Valued at $21 billion by market cap, Tourmaline Oil (TSX: TOU) pays shareholders an annual dividend of $1.40 per share, indicating a forward yield of 2.3%. However, if we include its special dividends, its dividend yield is much higher at more than 6%.
Tourmaline Oil is part of the cyclical oil and gas sector. It acquires, explores for, develops, and produces oil and natural gas properties in the Western Canadian Sedimentary Basin. In the second quarter (Q2) of 2024, Tourmaline Oil reported an operating cash flow of $755 million, or $2.12 per share, and spent $294 million on capital expenditures, indicating a free cash flow of $433.5 million, or $1.22 per share.
In 2024, it expects to generate an operating cash flow of $3.4 billion and spend $2 billion in capital expenditures. This suggests its free cash flow might total $1.3 billion, or $3.63 per share, this year. Given its quarterly dividend, Tourmaline has a payout ratio of less than 40%, which allows the company to target acquisitions, raise dividends further, and lower balance sheet debt.
Tourmaline recently announced a 3% increase in its quarterly dividend, reduced net debt by $137 million in Q2, and returned $288.5 million to shareholders.
Last month, Tourmaline disclosed plans to acquire Crew Energy for $1.3 billion, including its net debt of $240 million, which should diversify cash flow and earnings. Priced at eight times forward earnings, Tourmaline stock is quite cheap and trades at a 30% discount to consensus price target estimates.
Nexus Industrial REIT
Valued at $800 million by market cap, Nexus Industrial (TSX: NXR.UN) is a real estate investment trust (REIT) that offers you a tasty dividend yield of 7.6%. Nexus Industrial is focused on increasing shareholder value by acquiring industrial properties across Canada. The REIT owns 116 properties consisting of 12.4 million square feet of gross leasable area.
In Q2 of 2024, Nexus Industrial reported a net income of $43.5 million, driven by a net operating income of $31.6 million. Its net operating income rose 14.2% year over year due to the acquisition of income-producing industrial properties and growth in same-property income.
In the June quarter, Nexus Industrial advanced the construction of a 96,000-square-foot industrial project in Ontario, which is expected to generate an 8% return. The REIT completed the sale of an office property for $5 million and will offload 28 other non-core properties for $107 million. The proceeds could be used to lower long-term debt and invest in higher-return projects.
Like other real estate players, Nexus Industrial should benefit from lower interest rates in the next 12 months, making it a top investment choice.
