Retirees have no regular income and thus must depend on passive income to meet their expenses. Fortunately, in this low-interest-rate environment, investing in quality dividend stocks is an excellent means to earn a stable passive income and also benefit from capital appreciation. Moreover, retirees can avoid paying taxes by making these investments through their Tax-Free Savings Accounts (TFSA). Against this backdrop, let’s look at my three top picks for retirees.
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Bank of Nova Scotia
The Bank of Nova Scotia (TSX:BNS) would be an excellent buy for income-seeking retirees due to its consistent dividend payouts and high yield. Given its diversified revenue streams, the company enjoys healthy cash flows, allowing it to pay dividends since 1833. Additionally, the Toronto-based financial services company has increased its dividend at an annualized rate of 5% over the past 10 years and currently offers a healthy forward yield of 5.9%.
Moreover, BNS is focusing on expanding its business in North America while scaling back its Latin American operations with the intent of streamlining its operations and driving profitability. These initiatives could stabilize its financials and cash flows. Further, falling interest rates could boost economic activity, thereby driving credit demand and the demand for the company’s services. These growth prospects, combined with its attractive NTM (next 12 months) price-to-earnings multiple of 10.4, make it an ideal buy.
TC Energy
Second on my list is TC Energy (TSX:TRP), which transports natural gas across North America. It also operates 10 power-generation facilities with a combined power-generating capacity of 4.6 gigawatts. Supported by its high-quality assets, long-term take-or-pay contracts, and PPAs (power purchase agreements), the company has been growing its financials and cash flows, thereby allowing it to raise its dividends for 25 consecutive years. Its forward dividend yield stands at 5% as of the June 19 closing price.
Moreover, TC Energy continues to expand its asset base with its five-year capital investment plan, which includes $6 billion to $7 billion in annualized capital investments through 2030. Meanwhile, the company’s management expects to put $8.5 billion of projects into service this year. Additionally, it is optimizing its asset utilization, integrating its natural gas pipeline business to capture synergies, and enhancing safety practices to improve profitability.
Amid these growth initiatives, the Calgary-based company projects its 2027 adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) to be between $11.7 billion and $11.9 billion, with the midpoint representing 5.7% annualized growth. Considering all these factors, I believe TC Energy can maintain its dividend growth, making it an attractive investment opportunity.
Canadian Natural Resources
My final pick would be Canadian Natural Resources (TSX:CNQ), which has increased its dividends at an impressive annualized rate of 21% over the last 25 years. The oil and natural gas producer operates large, low-risk, high-value reserves that require less capital reinvestment. Additionally, its efficient and effective operations have delivered consistent financial results, allowing it to raise dividends uninterruptedly. With a quarterly dividend of $0.5875/share, its forward yield stands at a healthy 5.1%.
Moreover, CNQ continues to boost its production capabilities, with a planned capital investment of $6 billion for this year. Amid these growth initiatives, management projects its total average production for this year to be between 1,510 and 1,555 barrels of oil equivalent per day (BOE/d), with the midpoint of the guidance representing a 12.5% increase from the previous year. Amid these healthy growth prospects and its solid liquidity of $5.1 billion, the company could continue its dividend growth, thereby making it an ideal buy for income-seeking retirees.
