Retirees might have laddered Guaranteed Investment Certificates (GICs) and high-interest savings accounts to take care of their current and near-term cash needs. To go from a comfortable retirement to a luxurious one, you could boost your Tax-Free Savings Account (TFSA) income with high-yield dividend stocks.
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Enbridge stock offers a 7.2% dividend
Enbridge (TSX:ENB) stock is a retiree favourite for current income. The large-cap stock offers a dividend yield of close to 7.2%, which is paid out as quarterly dividends. ENB stock has been a tireless dividend stock for having paid dividends for shareholders of its common stock for approximately 70 years. The Canadian Dividend Aristocrat has also been increasing its dividend for about 27 years.
The blue-chip stock is likely to continue with dividend growth of about 3% per year with the growth rate boosting to about 5% post 2025. The stock seems to be getting some support around $48. It has bounced from that level. Now, at $49.43 per share at writing, analysts believe the stock remains discounted by roughly 16%. So, it’s not a bad time to buy shares for income.
BCE stock for a 6.6% yield
BCE (TSX:BCE) is another dividend stock retirees like to hold for current income. Because of higher interest rates, its stock price has been weighed down as the company has sizeable debt on its balance sheet. It’s a part of the business’s nature to require the debt and be capital intensive. If you don’t think high interest rates will stay forever, the big Canadian telecom is a good buy on weakness.
At $58.73 per share at writing, BCE stock offers a dividend yield of close to 6.6%. And analysts believe the stock trades at a discount of about 10%. The stock is a reasonable buy here for income.
Get a 6% dividend from CIBC stock
The big Canadian bank stocks are also popular sources of retirement income. In particular, Canadian Imperial Bank of Commerce (TSX:CM) stock offers a fabulous dividend yield of 6%. The bank stock remains profitable through economic cycles based on adjusted earnings.
Its trailing 12-month payout ratio was sustainable at about 61% of net income available to common shareholders. Its 10-year dividend-growth rate is 6.1%. Going forward, it has the capability to continue increasing its dividend over time.
That said, retirees should be prepared for a selloff during recessionary periods, at which time the banks experience higher loan-loss provisions. Those are the times to consider adding to your positions on weakness (perhaps after some basing for better safety) for more dividend income. At $57.90 per share at writing, CIBC stock trades at a discount of about 16% from its long-term normal valuation. So, like Enbridge stock, it’s not a bad time to buy some CIBC shares for income.
Investor takeaway
Retirees can buy selective dividend stocks like Enbridge, BCE, and CIBC to boost their tax-free income now to go from a comfortable retirement to a luxurious one. However, know that they’re higher-risk investments than the likes of bonds and GICs. So, aim to buy their shares at a discount and only put in money you don’t need for at least the next three to five years for these types of investments.
