The Canadian government introduced the Canada Pension Plan (CPP) in 1965 to help residents lead a comfortable life in retirement. The CPP is a monthly taxable benefit that aims to replace a portion of your income in retirement.
However, the amount you receive via the pension plan will vary across individuals and households, depending on various factors such as the age at which you start contributing to the account, the monthly contribution amount, and your average earnings throughout your working life.
What is the maximum CPP amount in 2024?
In 2024, the maximum monthly amount you may receive if you start your pension at age 65 is $1,364.60. However, the average monthly amount is much lower is $831.92. Now, if you delay the CPP payments by five years and begin payments at age 70, these payouts will increase by 42%.
Its evident that just depending on the CPP is not enough to meet your expenses in retirement. For instance, if we exclude monthly rental costs, the average expense for an individual living in Toronto is around $1,140 per month.
So, it makes sense to supplement your CPP with additional income sources. A proven low-cost strategy to begin a passive-income stream is to invest in quality dividend growth stocks. Here is one such quality TSX dividend stock you can use to generate a passive stream of recurring income
Supplement your CPP payout with these blue-chip stocks
Canadian investors should identify companies with a low payout and a growing earnings base. A low payout offers companies the flexibility to reinvest in capital projects, reduce balance sheet debt, target accretive acquisitions, and grow dividends. Moreover, a widening earnings base typically translates to an appreciation in share prices. In addition to recurring dividend income, long-term shareholders should benefit from capital gains, too.
One quality TSX stock you can consider buying in April 2024 is Tourmaline Oil (TSX:TOU). Valued at $22.6 billion by market cap, Tourmaline Oil was listed on the TSX back in November 2010. In this period, the stock has returned 214%, outpacing the TSX index which has gained 82%. If we adjust for dividends, total returns will be closer to 345%, compared to the TSX gains of 167%.
Tourmaline Oil is Canada’s largest and most active natural gas producer. It is an investment-grade exploration and production company with operations in the Western Canadian Sedimentary Basin.
In 2023, Tourmaline’s operation cash flow stood at $3.71 billion or $10.73 per share. The company reported a free cash flow of $1.69 billion last year, which means it spent over $2 billion in capital expenditures.
Tourmaline Oil pays shareholders an annual dividend of $1.20 per share, translating to a forward yield of 1.93%. However, in the four quarters, the energy giant also paid a special dividend, resulting in a total payout of $6.55 per share, translating to a trailing yield of 10%.
Tourmaline increased its based dividends twice in 2023 and raised payouts by 7% in 2024. It has increased dividends by 13 times since it was initiated six years back. Priced at 12.2 times forward earnings, TOU stock also trades at a discount of 20% to consensus price target estimates.
