2 Dividend Stocks to Retire on

Don’t want to spend retirement managing your portfolio? Buy quality dividend-growth stocks early on. Here are a couple of ideas.

| More on:

One purpose of dividend stocks in today’s investment portfolios is producing a nice income that beats inflation. When you’re investing in quality dividend stocks with the idea of holding them through retirement, you don’t have to concern yourself as much with the volatility. In fact, you can pretty much ignore the volatility and simply buy shares when they trade at good valuations. Here are two dividend stocks that passive-income investors hold before and through retirement.

National Bank of Canada stock

The big Canadian banks, including the sixth largest, National Bank of Canada (TSX:NA), have been very steady dividend payers for a long time. Having stable earnings and a sustainable payout ratio are key to National Bank’s safe dividend.

In the last 20 years, the Canadian bank has posted strong earnings throughout — it only experienced three years of negative earnings growth of 5-7%. In the period, the bank stock increased its dividend per share at a compound annual growth rate of approximately 10%. Its 10-year dividend-growth rate of about 7.8% is not bad versus the long-term inflation rate of about 2%.

Last month, David Baskin commented that National Bank was still his number one Canadian bank pick.

“National Bank has little competition in Quebec compared to the rest of Canada. It is very successful in managing wealth and proprietary trading. It will benefit from rising interest rates. It’s a solid pick.”

David Baskin, president of Baskin Wealth Management

The bank stock dipped about 10% from its high and now trades at a reasonable valuation of approximately 9.7 times this year’s estimated earnings. Its yield of about 3.7% is safe on a sustainable payout ratio of about 38% this year. Investors who have a long investment horizon possibly through retirement can take a closer look at the stock. The market volatility can provide an even better buying opportunity in the near to medium term.

Brookfield Infrastructure stock

Like National Bank of Canada, Brookfield Infrastructure (TSX:BIP.UN)(NYSE:BIP) also has strong business performance through market cycles. It is in the growing infrastructure sector. It enjoys growth organically. As well, it has seemingly endless capital and acquisition opportunities to expand its global infrastructure operations. It has grown its revenues and assets by 2.5 times and two times, respectively, from 2018 to 2021.

Even during the pandemic, its businesses, which transport or store energy, water, freight, and data, were largely deemed essential products and services. This allowed the company to report stable financial results in 2020 with increased cash flow. In fact, that year, it went on increasing its cash distribution like usual. The solid dividend stock’s five-year dividend-growth rate is about 7.9%.

Going forward, management seems committed to increasing BIP’s cash distribution by 5-9% per year. Its 2021 funds from operations payout ratio was 73% versus 74% in 2019, a normal year. From 2019 to 2021, its return on invested capital have been solidly between 12% and 13%.

The stock appears close to fully valued here. However, if you own it, especially at much lower levels, it may make sense to hold as an anchor for a long-term investment portfolio through retirement. At writing, it yields approximately 3.2%.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool recommends Brookfield Infra Partners LP Units. Fool contributor Kay Ng owns shares of Brookfield Infrastructure.

More on Dividend Stocks

hand stacks coins
Dividend Stocks

3 Ultra-High-Yield Dividend Stocks You Can Buy and Hold for a Decade

These three high-yield dividend stocks still have some work to do, but each are in steady areas that are only…

Read more »

senior man and woman stretch their legs on yoga mats outside
Dividend Stocks

TFSA: 2 Canadian Stocks to Buy and Hold Forever

Here are 2 TFSA-worthy Canadian stocks. Which one is a good buy for your TFSA today?

Read more »

calculate and analyze stock
Dividend Stocks

This 5.5% Dividend Stock Pays Cash Every Single Month!

This REIT may offer monthly dividends, but don't forget about the potential returns in the growth industry its involved with.

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

How to Use Your TFSA to Earn up to $6,000 Per Year in Tax-Free Passive Income

A high return doesn't mean you have to make a high investment -- or a risky one -- especially with…

Read more »

path road success business
Dividend Stocks

2 High-Yield Dividend Stocks to Buy Hand Over Fist and 1 to Avoid

High yields are great and all, but only if returns come with them. And while two of these might, another…

Read more »

Man holds Canadian dollars in differing amounts
Dividend Stocks

This 7% Dividend Stock Pays Cash Every Month

A high dividend yield isn't everything. But when it pays out each month and offers this stability, it's worth considering!

Read more »

young people stare at smartphones
Dividend Stocks

GST/HST “Vacation”: Everything Canadians Need to Know

The GST/HST "vacation" is a little treat for the holidays, along with a $250 payment. What should you do with…

Read more »

Train cars pass over trestle bridge in the mountains
Dividend Stocks

Is CNR Stock a Buy, Sell, or Hold for 2025?

Can CNR stock continue its long-term outperformance into 2025 and beyond? Let's explore whether now is a good time to…

Read more »