For Canadian retirees (or those preparing to retire within the next decade), it’s worth finding that perfect balance between income, growth, and the level of risk. While you do want to steer clear of those devastating risks (think the ones that could entail steep, irrecoverable losses), backing up the truck on GICs (guaranteed investment certificates) and interest from savings might not be the optimal move, especially if you really need your portfolio to start growing at a rate that can actually land you “real” returns (that’s returns after inflation).
We really do need a break with inflation, and while the recent dip in oil might ease fears of another huge wave of inflation, prices seem destined to keep moving higher, especially when it comes to necessities, like food and shelter, which, in my opinion, never really settled to levels that are acceptable. Indeed, more than 3% food inflation is too high, even if it’s lower than where it was at the peak. Whether we’ll ever get inflation at or below 2% for food remains the big question.
Either way, retirees must brace themselves for price hikes on a broad range of goods, and, with that, one might find it to be more worthwhile to take a bit more risk for a shot at better rewards.
Of course, you don’t need to speculate on crypto, AI hype plays, or anything of the sort. You can place a big bet on a bond proxy like a defensive utility with a growing dividend or perhaps even a lowly correlated stock or REIT that’ll pay you to wait.
In this piece, we’ll look at one higher-yielding stock that I think could make for a great fit as a part of a defensive dividend-focused retirement portfolio.
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TD Bank
I think the banks have a lot to offer to investors of all ages. Whether you prioritize capital gains potential, dividend yield, or dividend growth, the big banks get great grades in all three. And while it’s tough to pick off the Big Six banks right here, I do think TD Bank (TSX: TD) stock continues to be tempting, primarily because of its 11.6 times trailing price-to-earnings (P/E) multiple, which is around the lowest of the Big Six names right here.
You could argue that the multiple is lower for a reason, but the bank has more than one way to grow. With the willingness to embrace cost-saving tech that also might bring in more business (and loyalty) from customers as well as exploring ways to grow fee-based revenue, I’d argue that there are creative, higher-ROI ways to grow domestically.
Following the acquisition of Cowen, TD also has a nice runway in wholesale banking. While TD Bank retains its impressive retail advantage, I do think it will be interesting to see what kinds of strides TD Securities can make in investment banking. In any case, the 3.1% dividend yield and recent breakout past $140 per share seem worth long-term investors getting behind .
Of course, TD Bank won’t be without its risks. When things go bad for banking, it can be really tough to hang in there. The swelling dividend, I think, is a great incentive to stay the course for when banking goes sideways again. For now, though, I think the big banks have room to run, and TD Bank still looks discounted.
