There’s really no perfect stock for retirees since every retiree has their own goals and tolerance for risks. Just because a retiree has reached a certain age doesn’t mean one should sell out of stocks and go heavy on the bonds, cash, and Guaranteed Investment Certificates. Of course, many retirees out there might choose to, even if the rate of inflation is hovering on the high side.
For some retirees, especially those who’ve been around the investment game for decades, it makes sense to stay invested in stocks. And for some of the more adventurous retirees who are willing to bear added risks, investing in growthier themes might still make sense. Any way you look at it, retirees should strive to hit their optimal balance.
And for many, it involves tinkering with the asset allocation. Whether you’re in the 60/40 camp (60% stocks and 40% bonds), or something more conservative (think 30/70), or more aggressive (maybe 80/20), it’s vital that retired investors assess the risks and insist on a nice margin of safety. In any case, for seasoned investors, it might be wise to leverage their experience in stock investing to pick and choose value names in a market climate that might be considered by some to be a bit overvalued.
In this piece, we’ll look at two Canadian dividend stocks that might be the closest thing to perfect for your average retired investor who seeks income, a lower beta, and, of course, value.
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Enbridge
Enbridge (TSX: ENB) might be an obvious pick for retired income investors, but it’s nonetheless a fantastic option, especially now that it’s become a capital-gains play over the past two-and-a-half years. Of course, more upside momentum tends to mean a more muted yield. And today, shares yield 5.11%. That’s on the low side for Enbridge’s standards, but in this kind of rate landscape, it’s a generous payout and one worth grabbing, especially if the Bank of Canada winds up cutting rates from here.
Whether Enbridge is the last of the high-yield blue-chip cash cows remains the big question. Either way, I think there’s still plenty of value to be had in the exceptional pipeline as it expands its gas pipeline business while continuing to spoil shareholders who’ve stayed aboard.
Canadian Utilities
Canadian Utilities (TSX: CU) sounds like a boring, retiree-friendly kind of dividend play. But the share chart has been anything but, with shares now up more than 75% in two years. The massive yield has shrunk to 3.55%, but it’s still a fairly decent payout that’s more rewarding than risk-free rates, especially when you consider the dividend-growth prospects.
With a 0.59 beta and one of the lengthiest dividend-growth streaks in the utility industry, I’d not be afraid to chase the name. However, I would look to keep buying if the multi-year rally begins to experience a few more bumps in the road. As more of a behind-the-curtain winner from the great AI buildout (power and the grid matter more than ever), look for CU shares to keep going strong after many years of subpar performance (between 2012 and last year).
