With no regular income, retirees will have less appetite for risk-taking. Therefore, they would be prudent to invest in quality dividend stocks that are less prone to economic volatility and deliver stable returns. Meanwhile, let’s assess my top three picks, which look ideal for retirees.
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Fortis
Fortis (TSX:FTS) operates 10 regulated utility assets in Canada, the United States, and the Caribbean. It meets the electric and natural gas needs of 3.5 million customers. With a 99% regulated asset base, the company’s financials are less prone to market volatility. Additionally, around 93% of its assets are engaged in the low-risk transmission and distribution business, shielding its financials from commodity price fluctuations. Supported by these reliable financials, the company has delivered an average total shareholder return of 10.3% in the last 20 years, beating the broader equity markets. It has also raised its dividend for 51 consecutive years and currently offers a healthy forward dividend yield of 3.7%.
Moreover, Fortis continues to expand its rate base with its $26 billion capital investment plan. These investments could expand its rate base at an annualized rate of 6.5% through 2029. Furthermore, favourable customer rate revisions and improved operating efficiencies would support its financial growth. Amid these growth initiatives, Fortis’s management expects to increase its dividend by 4–6% annually over the next five years. Considering all these factors, I believe Fortis would be ideal for retirees.
TC Energy
TC Energy (TSX:TRP) is an energy infrastructure company that transports natural gas across Canada, the United States, and Mexico through its pipeline network. It also operates power production facilities. The company generates approximately 97% of its comparable EBITDA (earnings before interest, taxes, depreciation, and amortization) from rate-regulated assets and long-term take-or-pay contracts. It also has minimal exposure to commodity price fluctuations, thus generating stable and reliable cash flows. These healthy cash flows have enabled the company to distribute healthy dividends to its shareholders. Its quarterly dividend payout of $0.8225/share translates into a forward dividend yield of 5%.
Moreover, TC Energy has planned to make capital investments of $6–$7 billion annually through 2030, expanding its midstream asset base and power-generating facilities. Amid these growth initiatives, the company expects its comparable EBITDA to grow at an annualized rate of 8.6% through 2027. Additionally, its financial position has improved, with its net debt-to-EBITDA multiple decreasing from 5.2 in 2022 to 4.8 by the end of last year. Considering all these factors, I believe TC Energy can continue to pay dividends at a healthier rate, making it an excellent buy.
Telus
With its consistent dividend growth, Telus (TSX:T) is another stock that looks ideal for retirees. The Canadian telco earns substantial revenue from recurring sources, thus enjoying healthy cash flows and facilitating consistent dividend growth. It has raised its dividends 27 times since May 2011. Besides, the company has returned $27 billion to its shareholders since 2004, with $22 billion in dividends and $5.2 billion in share repurchases. T stock’s forward dividend also stands at an attractive 7.7% as of its April 23 closing price.
Telus continues to strengthen its wireless and broadband infrastructure through a capital investment of $2.5 billion for this year. These investments could expand its customer base, boosting its financials. Furthermore, its Telus Health and Telus Agriculture & Consumer Goods segments are growing at a healthier rate, driven by strategic investments and strong execution. Given its stable cash flows, expanding customer base, and solid performance in its growth segments, Telus could continue paying dividends at a healthier rate.
