Early retirement is a dream for many Canadians. But amid inflation and economic disruptions, it’s become quite a bit tougher to achieve, especially on an idealized timeframe. Of course, the potential for looming inflation or stagflation doesn’t have to derail FIRE (Financial Independence, Early Retirement) dreams, especially for Canadian investors looking to double down on the market’s low-cost cash cows.
Indeed, defensive dividend stocks that are gushing with cash can help investors withstand the odd market hailstorm while continuing to pay (and even grow) dividends or distributions. The same cannot be said for bonds, which won’t give you anything in the way of upward surprises regarding the passive income (coupons) you’ll be scheduled to receive.
In any case, let’s look at two cash cows I’d love to own for an early retiree’s passive-income stream. Unlike older retirees, younger prospective retirees have more time to invest and should make the most of the dividend-growth gems out there that can help those with significant assets keep up with the surging costs of everyday living.
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BCE
BCE (TSX: BCE) stock has already been clawed down viciously (close to 60% from peak levels) by the bear. More recently, the stock has looked more worthy of picking up, now flat year to date after gaining nearly 15% from May lows. As promos, competition, and investments heat up, it’ll be hard to turn a corner. But with the dividend already cut (now yielding 5.22%), I think the firm has what it takes to spark a turnaround as it re-grows its now-conservative and well-covered payout.
With the firm reportedly offering Perplexity Pro for a year for customers, I think BCE has the means to start moving higher again. Add the potential for data centre growth into the equation, and I find BCE to be a dividend gem to buy while it’s down and out because it may not stay depressed forever, especially as BCE looks to artificial intelligence (AI) for a jolt. With BCE teaming up with Canadian AI company Cohere, it will be interesting to see how the fallen telecom can pick up. I’m bullish, especially considering the pain that’s already in the shares.
Enbridge
Enbridge (TSX: ENB) stock sports a 5.83% yield despite galloping to a 33% gain in two years. The midstream energy firm’s latest quarterly earnings report was pretty good. With analysts staying confident in the name, expecting upside to come, I think it’s still a great time to punch a ticket at 23.1 times trailing price to earnings (P/E). That’s not a bargain-basement multiple, but a fair price to pay for a firm that’s really enjoying considerable cash flows.
As the pipeline giant keeps pulling in the cash, investors will continue to be rewarded for their patience. For any early retiree, the name is a worthy addition to any income-oriented portfolio. While there are risks, I must say I like the pipelines for their utility-like cash flows relative to the energy producers. As a pipeline leader, I’d not neglect the name, especially if you’re tempted by the nearly 6% dividend yield.
