In uncertain times, retirement can feel risky. As a retiree, you don’t want to see your life savings lose value in the market downturn. Fortunately, the stock market offers opportunities to generate a higher yield than the Guaranteed Investment Certificate interest rate of 3.6%. While there is business risk associated with stocks, there are certain low-risk businesses with robust asset allocation that can withstand a crisis. These dividend stocks are safer, and if invested through a Tax-Free Savings Account (TFSA), can provide you with tax-free passive income in retirement.
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Why yield matters in retirement
Retirement leaves you dependent on investment income with a fixed pool of money. At such times, maximizing yield becomes critical. Retirees should opt for safer dividend options whereby they are assured of the payout. The payout comes from the business’s free cash flow, and that depends on the stability of the income source.
Enbridge’s 5.2% yield: Still lucrative?
The global energy crisis, resulting from the Iran war, sent Enbridge (TSX: ENB) stock to an all-time high of $75. Buying a dividend stock at its all-time high is not recommended as the share price is rising due to the oil price volatility. If you have a few months to retire, you could consider waiting till summer and then buy Enbridge stock as the share price will see a seasonal dip on reduced demand from heating. A $50–60 price is a good entry point as it can help you lock in a 6% yield. The current rally has reduced the yield to 5.2%.
Enbridge earns money from the toll rate it gets for transmitting oil and gas through its pipelines and the utility bill from its gas business in the United States. There is a growing demand for natural gas to power artificial intelligence (AI) data centres. Moreover, the company is tapping natural gas exports. Canada’s push to build energy infrastructure to make its oil and gas available for exports to Asia will help Enbridge to keep earning and growing cash flows for the next decade.
The company expects to increase its dividends per share by 5% in 2027 and beyond. Despite a leverage ratio of 4.7 times, Enbridge maintains a conservative payout ratio of 60–70% of distributable cash flow, giving retirees confidence in its sustainable yield.
If you own this stock, keep holding for its safer dividend payouts. If you are considering buying, wait till July for the stock price to correct to $60 and lower before investing.
SmartCentres REIT’s 6.9% yield
Retirees can consider buying units of SmarrCentres REIT (TSX:SRT.UN) and earn a monthly payout. Its annual yield is 6.9%, almost double the GIC interest rate. SmarrCentres earns cash flow from store rent, of which 22.8% comes from Walmart, which has a recession-proof business.
The REIT has stood the test of time in the 2008 Financial crisis and the 2020 pandemic lockdowns. Both events had a material impact on its cash flow and the fair market value of its properties. You can be assured of receiving a 6.9% annual yield in the current market environment. The Canadian government’s push to build houses could accelerate SmartCentres’ intensification program to build city centres. City centres can attract better retailers and a higher rent.
Investor takeaway
Retirement is a major milestone, and while the Canada Pension Plan and Old Age Security provide income, maximizing yield from personal savings bridges the gap between pensions and passive income needs. Dividend stocks like Enbridge and SmartCentres REIT offer safer, higher‑yield opportunities that can help retirees preserve capital while earning steady returns.
