One of the most important factors when creating a solid retirement plan is setting up passive-income streams that can supplement your pension. Investing in high-quality dividend stocks and setting up a self-directed portfolio of such assets can go a long way in helping you cover expenses in your golden years.
Source: Getty Images
What to keep in mind
When searching for dividend stocks that can become your retirement safety net, you should keep an eye on some signs that make them safe investments. For a retirement fund, it’s better to invest in something you can hold for decades.
The most important factor to consider is whether the stock offers consistency. The best dividend stocks are those that regularly distribute dividends to shareholders for years without fail. The TSX boasts several dividend stocks that have paid through recessions, interest rate hikes, market downturns, and global health crises.
While no investment is immune to market volatility, stocks with reliable track records prove that they are better than most. Excellent histories with dividend payouts show that the underlying business can support payments and that the management values shareholder value.
A company with solid free cash flow can be a better fit for long-term holding than one without. Companies pay dividends using cash, not accounting profits. This means a good dividend-paying stock is one that can generate enough cash to cover its payouts without compromising capital investments or other expenses.
A low-flying dividend stock
The TSX has plenty of high-flying names when it comes to dividend stocks. However, it can pay to look into more obscure names. One such stock to consider is Firm Capital Mortgage Investment (TSX: FC).
Firm Capital is a $435.34 million market-cap Canadian financial company that acts as a non-banking lender. The company provides residential and commercial short-term bridge loans and standard real estate financing solutions. It provides construction, equity, and typical real estate financing for residential properties.
If you’re on the hunt for a reliable dividend-paying stock, FC checks all the right boxes. The company’s consistent income, managerial discipline, and conservative business model make it an attractive investment to consider.
Rather than relying heavily on a particular type of investment property, FC stock focuses on a diverse portfolio. It invests in everything from residential to commercial and industrial real estate, and it has mortgage investments and joint ventures. The company’s partnerships and mortgage investments let the business generate stable cash flows while focusing on scaling to generate even more revenue. In terms of future prospects, it can be a good holding to consider.
Foolish takeaway
Retirement planning doesn’t have to start when you’re nearing your golden years. In fact, a good retirement plan is one that starts as early as possible. It is time that you begin looking into setting up a fund that can support you in the best years of your life. Creating a self-directed portfolio of income-generating assets can be an excellent part of a solid long-term investment strategy.
To this end, Firm Capital stock can be a good investment to begin building the foundations of a robust retirement portfolio.
