The CPP, or Canada Pension Plan, is a taxable benefit paid to Canadians each month. This pension payment aims to replace a portion of your income when you retire. In order to qualify for the CPP, you need to be over 60 years old and should have made at least one valid contribution to this plan.
The CPP amount you receive every month is tied to factors such as your contributions to the CPP, average earnings throughout your working life, and the age you decide to start the payment.
Typically, the standard age to start the pension is 65. But you can start receiving the payout as early as the age of 60 or delay it until age 70.
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Why is it good to delay the CPP payout?
If you decide to delay the CPP, you will benefit from higher payouts. For instance, for every month the CPP is delayed, the payment will increase by 0.7%. So, if the CPP is started at the age of 70, your payments will increase by a significant 42%.
The average CPP payment in 2023 for a pensioner starting payments at age 65 is $760.07 in 2023. But for a 70-year-old, this amount will increase by 42% to almost $1,080 per month.
There are a few factors you need to consider before you start the CPP payments. If you have diversified income sources and are healthy, you can choose to delay the CPP, resulting in a larger monthly pension, which also protects you from outliving your savings.
One strategy that will help you create a stable and recurring passive-income stream allowing you to delay the CPP is dividend investing. Here, investors need to identify quality companies that pay shareholders a tasty dividend yield with the potential of raising these payouts consistently over time.
This TSX stock can supplement your CPP
One such TSX stock is Brookfield Renewable Partners (TSX:BEP.UN). Among the largest producers of clean energy, BEP currently offers shareholders a dividend yield of 5.1%. Down 44% from all-time highs, BEP stock has returned 346% to shareholders after adjusting for dividends in the last 10 years. If you zoom out further, total dividend-adjusted returns are close to 1,670% since August 2003.
BEP has a diversified portfolio of renewable power assets, which accounts for 96% of the company’s business. With an operating capacity of 25,900 megawatts and an annualized LTA (long-term average) generation of 71,400 gigawatt hours, the renewable giant also has a development pipeline of 134,400 megawatts, making it a solid investment today.
Brookfield Renewable Partners managed to grow funds from operations by double-digit percentages year over year. It also advanced its development program and commissioned an additional 800 megawatts of capacity, which should increase annual cash flows by US$9 million.
Its funds from operations rose to US$312 million in the second quarter, while capital-recycling activities brought in US$600 million in the last six months.
Brookfield Renewable is positioned to benefit from a diverse and global franchise. It continues to see rising corporate demand for renewable energy contracted at attractive prices. For instance, it expects demand from certain tech companies to more than triple by the end of this decade due to computing demand for generative artificial intelligence applications.
In addition to its tasty dividend yield, BEP stock also trades at a discount of 40% to consensus price target estimates.
