Aiming for a perfect retirement, where the utility and grocery bill is taken care of without worry? You have no debt and multiple sources of income. You move into a consulting role, working part-time or on a needs basis for some extra income for recreation. For this dream retirement, you need to start investing 20 years ahead in stocks.
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Role of dividend investing in retirement planning
Speaking of multiple income sources, you can build dividend pools for each expense for a few years and then let your money work for you through the power of compounding. Consider building a $50,000 investment pool for utility bills, and another $50,000 for groceries and transportation.
This 6% dividend giant could be your retirement partner
In Canada, you have some good retirement partners that offer a 6% dividend yield. Among them is CT REIT (TSX: CRT.UN), a REIT that grows its distribution annually, offers a dividend reinvestment plan (DRIP), and has lower debt on its balance sheet. More than 95% of its debt is unsecured debentures, which are renewed annually. There is no construction loan, and mortgages make up a very small portion.
Moreover, CT REIT’s operating expenses are lower, considering it doesn’t spend much on marketing and broker commissions to fill occupancy. With its parent Canadian Tire occupying 92.2% of the total gross leasable area and contributing to 90.9% of annualized base minimum rent, it is fair to assume the financial strength of the retailer is better reflected in its REIT business.
CRT.UN increases dividends by 3% annually in July. However, it slowed this growth to 2.5% this year as the parent invested in the True North program to drive sales. Its same-store intensification and development projects were also slow compared to 2024.
The 6% yield of CT REIT can increase to 7.4% in 10 years and even 17.5% in 20 years.
How CT REIT can give you passive income after you retire
Let’s consider a scenario wherein you invest $12,000 in 2026 and $6,000 annually for the next nine years. Your total investment in CT REIT alone will come to $66,000. Now, invest in a DRIP (dividend reinvestment plan) from 2026 onwards.
For calculation purposes, we assumed CT REIT’s average unit price remains $16.5 for the first 10 years and $18 for the next 10 years, with dividends growing at a compounded annual growth rate (CAGR) of 2%. A $12,000 investment could buy 727 units at an average share price of $16.50. However, if you invest a lump sum today, you can buy 753 units at $15.92.
The 727 units can earn you $689 in annual dividend income. Add to it another $6,000 investment from your pocket, and you keep accumulating income-generating units. The first 10 years of accumulation could accelerate the wheel of compounding. After that, you can just let the $66,000 investment work for you through DRIP. The $4,858 dividend earned from the initial 10 years could more than double to $11,534 without a single dollar of investment from your pocket.
