It is never a bad time to prepare for retirement. The reality in this environment with always low interest rates is that retirees must have a good portion of their portfolio of shares in order to achieve a higher total return.
Conservative investors who do not want to add too much risk to their portfolios must identify good quality stocks that can recover from a recession and still offer a regular income.
In the dividend-paying segment, it sometimes makes sense to focus on what some traders consider boring, old economy companies, such as electricity and gas companies, major infrastructure providers and banks and insurance companies – companies that continue to pay dividends due to the fat and thin market
1. Toronto Dominion Bank
Canadian banks are among the best dividend-paying stocks in North America. What makes them different from their colleagues south of the border is less competition, a healthy regulatory environment and their diversification.
They operate in a kind of oligopoly where competition is limited and the regulatory environment is extremely favorable for growth. Canada's best lenders have been very consistent in rewarding investors with steadily growing dividends, which they spend around 40% -50% of their income.
In this group, I especially love Toronto Dominion Bank (TSX :), Canada's second largest lender. It has a very attractive dividend policy, supported by a strong growth momentum, and an important retail banking business in the US. Indeed, TD has more retail branches in the US than in Canada, with a network that extends from Maine to Florida.
In general, TD generates around 30% of its net income from its US retail operations. The bank also has a 42% interest in TD Ameritrade (NASDAQ 🙂 with a fast-growing credit card portfolio.
Price chart of Toronto Dominion Bank
After a 10.4% payout increase in February, income investors in TD shares now earn a quarterly dividend of $ 0.56 per share, which is translates into a return of 3.86%. The bank is expected to grow its dividend payments between 7% and 10% each year – an impressive growth rate at a time when the state benefits yield less than 1.69%. TD shares, after rising 16% this year, were traded yesterday at $ 57.68.
2. Dow Inc.
The newly established Dow Inc (NYSE 🙂 offers after its recent spin-off from parent company DowDuPont Inc. a very attractive possibility to generate income for pensioners.
Dow shares began April 1 after the old Dow Chemical ]] (NYSE 🙂 and DuPont (NYSE 🙂 announced a major merger of $ 120 billion in 2017, with the intention of establishing three separate entities focused on agricultural products and a specialty chemicals company.
The third became Dow, fully focused on material sciences, plastics and silicones. What makes it an attractive income-generating opportunity is the clear focus of the chemical producer to return most of his income to investors in the form of dividends and share purchases. According to the company's presentation to investors, the new Dow will pay out 65% of its net result to shareholders each year through share buybacks and a hefty dividend.
His share currently pays $ 0.7 dividend per share, with an annual return of around 5.8%. With the intended payout ratio of 45% of the company's net operating result, that dividend is fairly conservative.
That said, investors should be aware that plastic, an oil derivative, is a cyclical company where supply and demand are closely linked to global economic growth and other macro-influences. That is why the stock has fallen by around 4% this year, as the trade battle between the US and China has eroded the demand for industrial products. The stock closed at $ 47.91 yesterday.
3. Enbridge Inc.
Utility & # 39; s is another area where you can get a good income stream if you continue to invest for the long term. North America's largest pipeline manager, Enbridge Inc (NYSE :), could fit well into your revenue-generating portfolio, with its huge moat and its crucial position in the North America energy supply chain.
Enbridge is also a good defensive stock to hold on to when the economic headwind is increasing. The company pays $ 0.55 a quarterly dividend with an annual dividend yield of 6.28%. The payout is expected to increase by 10% per year as the company completes its many development projects and benefits from Canada's very tight pipeline capacity.
Over the past two years, Enbridge has implemented a restructuring plan, sold assets, focused on its strengths and repaid its debts. These measures are likely to benefit long-term investors whose goal is to earn steadily growing income.
Enbridge share, rising to 13% so far in 2019, closed yesterday at $ 35.15 in New York.
Bottom Line
Adding solid dividend shares to a portfolio could create a sustainable income stream to be trusted during retirement. Investors should slowly start building their portfolios when prices are attractive. If they continue to reinvest payouts to buy more shares from these companies, they also unlock the powerful preparation process.
