Work pensions are becoming harder to come by these days. Arguably, it’s no longer the expectation when one applies for a new job. Of course, Registered Retirement Savings Plan (RRSP) matches may very well be the “new,” cheaper way for companies to add a bit of sweetener to an employee’s retirement path. And while the RRSP match is a must (it’s pretty much free money from your work), if you can get it, the main takeaway is that it’s on investors to make their own income streams or workplace pensions.
When it comes to your RRSP or Tax-Free Savings Account (TFSA), there are a ton of different securities you can pick up to produce an income stream that can help add to your retirement. If you’re still young, it might make sense to go for growth (think appreciation over higher-yielding names), but if you’re about ready to shift gears from growth to value and yield, it might be time to give some of the market’s cherished dividend payers (and growers) a closer look.
With the broad market’s rotation from growth to value (tech has taken a hit while almost everything else has looked quite resilient), perhaps it’s time to construct your own pension-like vehicle to supplement your income, whether you’re ready to retire or enter some sort of semi-retirement or sabbatical.
At this juncture, I’m a big fan of the higher-yielding real estate investment trusts (REITs), the steady utility plays (some also have newfound share price momentum riding behind them), the telecoms, and, of course, the pipeline and energy producers. SmartCentres REIT (TSX: SRU.UN) stands out as a great option for yield and value, while Telus (TSX: T) is also a strong contender for a passive-income portfolio.
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SmartCentres REIT
In my humble opinion, SmartCentres REIT looks like one of the best yield deals in the market. The yield stands at just shy of 7%, and it’s very well-supported by strong fundamentals. Whether we’re talking about the high occupancy rate or the potential to expand upon funds from operations (FFOs) via expansion into mixed-use properties, I’d stick by the retail REIT, even if others might have doubts about the durability of retail properties in the face of downturns.
After a 5.5% plunge from 52-week highs, I’m starting to think it’s last call for that 7% yield. And while shares might be choppier than most other REITs, I think there’s also upside if rates were to continue on the downtrend. For now, though, we’re facing a rate pause, but as oil prices rocket and food inflation remains overheated, I wouldn’t be surprised if a hike is in the cards once the pause is over. That might rock the REITs, but for long-term investors, that might be an opportunity to get more yield for less!
Telus
Do you need a massive income boost? Telus is one of the go-to names for many, given its yield is above the 9% level. Of course, such a towering yield isn’t without its risks. Though I suspect management is committed to keeping it alive, there’s no doubting that the commitment is hefty, and it makes the job of turning the business around that much harder.
Either way, the rise of satellite connectivity and a capital expenditures cliff for the industry might be relief enough to allow investors to have their cake and eat it, too. In short, don’t depend on Telus’s yield uplift too much, and you won’t be disappointed if a dividend cut (some think there’s a growing chance of this) does happen. In terms of value and turnaround potential, though, I like the name for those who know what they’re getting into.
