Retirement can be scary as active income stops. You are worried your retirement pool may exhaust or lose value in an economic crisis. However, investing in fundamentally strong stocks with low-risk business models in a bear market can grow your retirement pool in the next three to five years. Moreover, it can help you lock in higher passive income.
Five TSX champions every retiree should consider
Whether you have built a million-dollar or $100,000 retirement pool, whether you retire early or late, whether you have debt or are debt-free, these stocks could partially meet your retirement needs.
TSX dividend champions
As you are nearing retirement or have already retired, you need a stock that can give you immediate and higher payouts, increasing payouts alongside inflation while keeping your invested amount safe. The average retirement tenure is 20 years, assuming you retire at 65 and live till 85. Even if you live beyond 85, stocks should give passive income. All four requirements can be met by three dividend stocks.
Telus stock
Telus (TSX:T) has a stable source of income coming from subscriptions. It has a history of paying regular dividends since 2002 and growing dividends in 21 of the last 24 years. That’s an entire retirement life. The company can keep giving dividends and grow them by mid-single digit for the next decade.
Communications and the internet are the new oil of the digital world, making Telus resilient to the worst crises. Also, the stock price volatility is low. If you invest now, you can get the stock at its nine-year low and lock in a dividend yield above 7.5%.
Enbridge
Enbridge (TSX:ENB) is a range-bound stock, currently trading at its upper range of $64-$65. This has reduced its dividend yield to 5.8%. It would be worth waiting for the stock to fall to $55 in mid-year as you can lock in a 7% yield. Winter is generally a peak season for Enbridge as the oil and gas volumes transmitted through its pipeline are the highest. The volumes slow in summer, making it a stock to buy at the dip.
Enbridge has been paying dividends for over 60 years and growing it in the last 30 years in a row. Its low-risk business model keeps the payout ratio between 65% and 70% of free cash flow (FCF), giving the company the flexibility to pay dividends, even when FCF is low.
CT REIT
CT REIT (TSX:CRT.UN) is another stock with a high yield of over 6%. It has been paying dividends for the last 10 years, growing them at an average annual rate of 3%. While Enbridge and Telus give quarterly dividends, CT REIT gives monthly payouts as it transfers 75% of its funds from rental operations to unitholders.
Since its tenant is its parent company Canadian Tire, the real estate investment trust (REIT) is not worried about low occupancy. It also increases its rental income by buying and developing new retail stores and intensifying existing ones. The extra space is leased to other retailers.
However, CT REIT carries concentration risk. If Canadian Tire closes its stores or the retail sector faces a downturn, the REIT’s rent could fall. Such risks generally show early warning signs instead of a sudden collapse, giving you time to adjust investments.
TSX growth champions
Descartes Systems (TSX:DSG) and Constellation Software (TSX:CSU) are resilient growth stocks growing at a five-year compounded annual growth rate (CAGR) of 20%. If you haven’t built a sizeable retirement pool, you could invest in these stocks to double your money in five years. They have a low-risk business with a diverse customer base across verticals.
Descartes provides logistics and supply chain management solutions across various verticals, from airlines to e-commerce to oil and gas. It benefits when the trade activity is high or complexity increases with tariffs and customs. The consistent growth in revenue and profits helps it deliver 20% growth.
Constellation achieves consistent earnings by acquiring vertical-specific software companies every year and reinvesting their cash flow for more acquisitions. The power of compounding helps the stock price deliver stable growth.