If there’s one thing retirees need first and foremost, it’s passive income. Dividend stocks are one of the most reliable and stress-free ways to get in on investing and see cash flow in, no matter what the markets are doing. But that doesn’t mean every single dividend stock out there is a buy.
Today, let’s look at what makes a dividend stock safe, what to look for, and one company that can provide income for years to come.
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What makes a dividend stock so great?
In retirement, passive income is already coming in through your savings. That’s great, but the world is aging, and people are living longer. That means the retirement cash people saved 20 years ago won’t get you as far as it does today. In fact, if you’re living to the average life expectancy of around 90 and want to spend about $60,000 per year, that’s savings of around $1.5 million needed if retiring at 65!
That’s where dividends can come in. Not only can retirees use dividends to help fund retirement, they can use those regular payments to compound the cash they’re still saving for future income. That steady cash flow can be reinvested again and again, or used to fund expenses. No matter how you look at it, it’s taking the edge off market volatility.
Plus, finding a great dividend stock also means you’re connecting likely to a mature, financially healthy business. Ones with consistent earnings. These firms tend to weather economic ups and downs, and can even use those ups and downs as growth opportunities. That’s far better than risky speculative stocks. And since dividends also grow over time, with major firms often increasing on a yearly basis, this means you’re also seeing growth in income along with returns. So, what dividend stock could be best for retirees right now?
Consider POW
For those wanting a strong dividend stock that looks like it’ll keep on growing, Power Corporation of Canada (TSX: POW) looks like a strong option for stability and income. The dividend stock’s holdings in financial services, insurance and other businesses have a layer of resilience. Its diversification insulates it from shocks in any single sector, thus making it reliable for long-term holding. And this has been seen in its recent performance.
On the value side, Power stock trades at 10.37 times earnings at writing. This is quite attractive given its growth and market position. That growth has made the share price rise 40% over the last year alone, far outpacing the market. Meanwhile, its profit margins remain above 7%, and its operating margin is above 16.6%. Therefore, management remains disciplined and efficient in its operations.
Then there’s the dividend. Power currently offers a 4.2% dividend yield at the time of writing. That’s paired with a manageable 55% payout. Therefore, investors can look forward to a dividend not only paid on time and in full, but a growing one as well. Plus, with massive cash on hand of over $190 million and modest debt, there’s even more stability from this dividend stock. Right now, if you were to put $50,000 into Power stock, retirees could start earning $2,072 each and every year!
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| POW | $59.04 | 846 | $2.45 | $2,072 | Quarterly | $49,962 |
Bottom line
Power isn’t some growth stock about to explode. It’s a steady stock in a steady industry with steady cash flow. For investors wanting dependable dividends at a great price, Power stock certainly looks like a strong option on the TSX today.
