Health and money are two things all retirees wish they had in their golden years so they can actually enjoy them after a lifetime of work. Both require planning and the right steps in the early years, like making the right investment choices when building your nest egg. Dividend and growth stocks have their place and utility in your retirement portfolio.
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A dividend stock
TC Energy (TSX: TRP) is one of the best energy stocks you can buy for dividends. Technically, it’s an outstanding stock to buy for both dividends and growth right now, considering the bullish momentum that allowed it to climb over 35% in the last 12 months.
However, considering its historic yield and stellar dividend history (22 consecutive years of growth), dividends are its most cherished characteristic. It also offers good value right now, with a price-to-earnings ratio of 14.
Its business model is another reason investors flock to this stock. As a pipeline giant focused on natural gas, the stock is relatively safer. The pipeline-oriented business model shelters it against price fluctuations, and the natural gas focus adds a thin layer of safety compared to oil-heavy companies, as oil is likely to phase out faster compared to natural gas (from an emissions perspective).
Having a dividend stock that can not just generate cash in your portfolio but also keeps growing year after year can offer multiple retirement-stage benefits. You can reinvest the dividends in the company itself to increase your stake and generate a more sizable income when it’s time to cash out or use the cash to invest in other businesses.
A growth stock
Even though FirstService (TSX: FSV) also pays dividends and is counted among Aristocrats, its primary return dimension is growth. It has more than doubled its investor’s capital in the last five years (111% growth), and that includes a massive slump where it fell about 40%.
The underlying business is solid and split into two segments. One is property management, which dominates the North American market as one of the most prominent players, and the other is essential property services.
Having a growth stock like this in your portfolio can be crucial to growing the size of your nest egg to decent proportions, assuming you have stashed a sizable enough amount in such stocks. Growth stocks that you can hold long-term should be an important part of your retirement planning but with the proper checks.
If a stock starts going down with no chance of going up, you should exit the position altogether. In contrast, you may want to cash out if such stocks go bearish close to your retirement years to maximize the gains.
A combination of both
National Bank of Canada (TSX: NA) offers a healthy combination of both growth and dividends. It’s currently offering a yield of about 3.2% and has risen about 93% in the last five years. At this rate, it can double your capital in less than six years. It also stands out from the other bank stocks in Canada in terms of overall return potential.
A stock like this gives you the best of both worlds. But it stands out from other such picks because of its safety, making it a viable long-term pick.
Foolish takeaway
All three stocks are worth buying for your retirement portfolio. They all have their strengths and limitations, but with adequate diversity, you can undermine these limitations and boast of their strengths. However, even if you create a portfolio solely from safe, long-term picks, you shouldn’t ignore market realities and make adjustments whenever necessary.
