Retirement Savings Boost: Increase Your Income by $988 Annually

Don’t just let your savings sit there. Add to them with even just a comparatively small investment in this dividend stock.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published September 18, 2024 9:30 pm EDT

The average Canadian nearing retirement holds around $184,000 in savings. And that’s great, certainly. Yet experts suggest that most will need closer to $1 million to maintain their standard of living in retirement.

This gap highlights the importance of long-term planning and investing strategies to ensure financial stability. With Canadians living longer and retirement potentially spanning decades, it’s essential to close the gap between what people have saved and what they’ll need for a comfortable retirement. So, how do you get started?

Max it out

For Canadians looking to catch up on their retirement savings, maximizing contributions to their RRSP (Registered Retirement Savings Plan) and TFSA (Tax-Free Savings Account) is a smart approach. RRSPs offer immediate tax deductions and allow investments to grow tax-free until withdrawal, making it an effective tool for long-term retirement growth. TFSAs, however, offer tax-free growth and withdrawals, making them ideal for those who want flexibility and tax-free income in retirement.

To further boost retirement savings, investing in dividend stocks through RRSPs and TFSAs is a powerful strategy. Dividend stocks provide regular income, which can be reinvested to grow savings faster over time. The combination of capital appreciation and dividend payments, compounded over decades, can significantly increase the value of retirement portfolios. Additionally, dividend-paying stocks often offer stability, as many companies with strong dividend histories are financially sound and less volatile.

One to consider

Labrador Iron Ore Royalty (TSX:LIF) on the TSX is a strong investment option for those seeking safety and growth in their portfolio. LIF offers a robust dividend yield of 10.28% at writing, making it appealing for income-focused investors. Its trailing price-to-earnings (P/E) of 8.72 and forward P/E of 7.45 suggest it’s attractively valued, particularly for a stock with such a high payout ratio. The company’s management team has a strong track record of maintaining healthy cash flows. Thus ensuring dividends are sustainable even in challenging market conditions. With a solid focus on long-term performance, LIF provides a safe option for those seeking reliable returns.

LIF’s recent earnings momentum adds to its appeal. In the second quarter of 2024, the company reported quarterly revenue growth of 2.6% year over year, driven by strong performance in iron ore sales. Net income grew by 19.9%, reflecting the company’s operational efficiency and ability to capitalize on market conditions. Additionally, LIF has maintained an impressive operating margin of 75.74%. This further underscores the company’s profitability and ability to generate consistent earnings, thereby making it a reliable choice for investors.

Despite being near its 52-week low, LIF remains a valuable investment due to its high dividend yield and solid financial performance. With a payout ratio of 89.67% and a five-year average dividend yield of 9.36%, it offers stability for income-focused investors. The company’s strong balance sheet, including $67.7 million in cash and a current ratio of 1.35, ensures its capacity to meet financial obligations while continuing to reward shareholders. For those looking for a dependable and safe dividend stock on the TSX, LIF is an excellent choice.

Bottom line

Labrador Iron Ore Royalty on the TSX stands out as a reliable and attractive option for dividend-seeking investors. Its strong 10.28% dividend yield, solid earnings momentum, and disciplined management make it a valuable long-term investment, especially for those seeking steady income and stability. With its strong track record of profitability and sound financial health, LIF continues to offer security in an often unpredictable market. So, how much could investors earn?

Let’s say you put $10,000 towards this stock. Here is what that could bring in through dividends alone.