Retirees: Buy These 2 Stocks for Steady Dividend Income

Canadian retirees should consider purchasing two blue-chip assets that will deliver steady dividend income and help combat soaring inflation.

| More on:

Dividends are nice to have, even for Canadian retirees receiving the Old Age Security (OAS) and Canada Pension Plan (CPP) benefits. Both pensions are for life but not necessarily enough, especially if inflation is rising at a rapid pace like today. Besides boosting the OAS and CPP, any additional income should help retirees cope with soaring costs of living.

Given the current supply chain disruptions and geopolitical tensions, a recession is around the corner. Jeff Rubin, the chief economist at Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) Markets, said that in the last 50 years, runaway inflation has always led and ended in significant recessions.

Because of this frightening truth, retirees should consider using their cash savings, or a portion of it, to purchase dividend stocks. CIBC and an energy major like Enbridge (TSX:ENB)(NYSE:ENB) can provide retirees with a steady dividend income regardless of economic environment.

The pair of blue-chip assets would be enough to serve as the third pillars in retirement. Moreover, they aren’t dividend traps like other companies that resort to dividend cuts when the going gets tough.

Premier income stock

Many market analysts say there hasn’t been a poor time to invest in the Big Five banks in Canada, including CIBC. The country’s fifth-largest lender is a premier income stock for its 154-year dividend track record. At $141.84 per share, the $64 billion bank pays a 4.53% dividend — the second-highest dividend in the banking sector.

CIBC reported stellar earnings in fiscal 2021, although earnings growth in fiscal 2022 could be much lower due to the massive headwinds. In the year ended October 31, 2021, net income grew 42% versus fiscal 2020. However, the quarter ended January 31, 2021, net income increased by 15% compared to Q1 fiscal 2021.

Nevertheless, the dividends should be safe, as the bank has maintained the average payout ratio below 50% over the last five years. This historical data shows that CIBC is among the reliable dividend stocks that retirees can own today.

Inflation-beating asset

Enbridge is certainly an inflation-beating stock in 2022. This top-tier energy stock pays a generous 6.14% dividend. The current share price of $55.92 (+14.95% year-to-date) is worth it if the purpose is to boost household income or build retirement wealth.

Besides the high yield, retirees and would-be investors can expect growing dividends from this $113.27 billion energy infrastructure company. Enbridge operates like a utility company within the often volatile energy sector. The 27 straight years of dividend increases have bolstered shareholder returns.

Enbridge operates four blue-chip franchises that collectively delivers predictable cash flows. More importantly, about 80% of its EBITBA have built-in inflation protectors. Each of the core business segments have visible organic growth opportunities. Management expects the business to grow between 5% to 7% through 2024.

The $5.81 billion earnings attributable to common shareholders last year represent a 95% increase versus 2020. Enbridge president and CEO Al Monaco said, “2021 was a pivotal year for Enbridge.” Apart from the strong operating and financial performance, management advanced its strategic priorities and strengthened the competitive positioning of Enbridge’s conventional and low-carbon businesses.

Avoid financial dislocation

Retirees can avoid financial dislocation by holding dividend-paying, blue-chip stocks. The payouts from CIBC and Enbridge also helps reduce the volatility of their total returns.

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.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge.

More on Dividend Stocks

Make a choice, path to success, sign
Dividend Stocks

Is Fortis Stock a Buy for its Dividend Yield?

Fortis has increased the dividend for 51 consecutive years.

Read more »

Middle aged man drinks coffee
Dividend Stocks

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

BAM stock recently jumped after beating earnings. But is it still a buy, or is it better to wait?

Read more »

Electricity transmission towers with orange glowing wires against night sky
Dividend Stocks

3 Top Canadian Utility Stocks to Buy in November

Are you looking for some top Canadian utility stocks to own? Here's a look at three must-have options for any…

Read more »

View of high rise corporate buildings in the financial district of Toronto, Canada
Dividend Stocks

Is First Capital REIT a Buy for its 4.8% Yield?

First Capital is a REIT that offers you a tasty dividend yield of 4.8%. Is this TSX dividend stock a…

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

TFSA Passive Income: 3 Stocks to Buy and Never Sell

Stocks like Fortis Inc (TSX:FTS) are worth holding long term.

Read more »

Electricity transmission towers with orange glowing wires against night sky
Dividend Stocks

Canadian Utility Stocks to Buy Now for Stable Returns

Given their regulated business, falling interest rates, and healthy growth prospects, these three Canadian utility stocks are ideal for earning…

Read more »

nuclear power plant
Dividend Stocks

The Best Canadian Stocks to Buy and Hold Forever in a TFSA

TFSA investors can buy and hold these Canadian stocks to generate above-average, tax-free returns over the next decade.

Read more »

Person holding a smartphone with a stock chart on screen
Dividend Stocks

Is Telus Stock a Buy for its 7.3% Dividend Yield?

Although the 7.3% dividend yield Telus offers is attractive, it's just one of many reasons why the telecom stock is…

Read more »