Top 10 Canadian Stocks for a Retiree’s Portfolio


Last week, I discussed the difference between a retirement portfolio and a retiree’s portfolio. There is a big difference between investing for the future and withdrawing from this investment to live. I put my portfolio on fast forward and took a look at trades I would do to make the switch toward a retire-ready portfolio. I was quite surprised to see how different both portfolios were.

The point is that you must think about withdrawing money once you retire. Therefore, you need cash ready to be withdrawn, and you need a strong portfolio paying healthy dividend to support your lifestyle as much as possible. In a perfect world, we would all live off our dividend and give this well-built nest egg to our children. But the reality is otherwise.

My top 10 Canadian “Retirement” Stocks

To conclude this reflection on portfolio management, I’ve done some research and handpicked my top 10 Canadian dividend stocks for retirees. I could have selected the 6 big banks, 3 telecoms and 1 energy stock, and I would have been done within seconds. I’m actually starting with 2 banks and 2 telecoms, but I tried my best to build a solid portfolio with more options.

Royal Bank (RY.TO) 3.61% yield

I know, I didn’t want to take only banks, but a Canadian dividend portfolio isn’t one without a few banks, eh? Over the past 5 years, RY did well because of its smaller divisions acting as growth vectors. The insurance, wealth management and capital markets pushed RY revenue. Royal bank also made huge efforts into diversifying its activities outside Canada. Canadian banks are protected by federal regulations, but this limits their growth. Having a foot outside of the country helps RY to reduce risk and to improve growth potential.

National Bank (NA.TO) 3.88% yield

I promise, this is the last bank of the group! I just couldn’t ignore this fast-growing regional bank! NA aimed at capital market and wealth management to support its growth. Since NA is heavily concentrated in Quebec, it concluded deals to do credit for investing and insurance firms under the Power Corporation (POW). Branches are currently going through a major transformation with new concepts and enhanced technology to serve clients. While awaiting the results, it seems wise to invest in digital features to reach out to the millennials and improve efficiency.

Telus (T.TO) 4.54% yield

Telus has been one of my favorite Canadian holdings since I established my 7 rules of dividend growth investing several years ago. Telus has been showing a very strong dividend triangle over the past decade. The company can grow its revenues, earnings and dividend payouts on a very consistent basis. Telus is very strong in the wireless industry and now attacks other growth vectors such as the internet and television services.

BCE (BCE.TO) 5.40% yield

BCE doesn’t have the same growth that Telus had over the past 5 years, but it is a very solid dividend payer. When you have the possibility to invest in a strong yielder as BCE and still hope for a small stock appreciation growth, you must take a hold of it. BCE shows a well-diversified business model and will continue to generate strong cash flow in the future.

Emera (EMA.TO) 5.67% yield

Emera is a very interesting utility now that it has completed the purchase of Florida-based TECO energy. EMA now shows $28 billion in assets and will generate revenues of about $6.3 billion. It is well established in Nova Scotia, Florida and four Caribbean countries. This utility counts on several “green projects” with hydroelectricity and solar plants. This decreases the risk of future regulations affecting its business as the world is slowly moving toward greener energy. Finally, EMA completed their Maritime Link project within its time limit and budget! I like when management can run large projects without going overboard with unexpected expenses.

Fortis (FTS.TO) 4.25% yield

Fortis aggressively invested over the past few years resulting in strong and solid growth of its core business. You can expect FTS revenue to continue to grow as it is expanding. Strong from its Canadian base business, the company is able to generate sustainable cash flow leading to 4 decades of dividend payments. The company has a five-year capital investment plan of approximately $14.5 billion for the period 2018 through 2022, up $1.5 billion from the prior year’s plan. Chances are most of its acquisitions will happen south of our border.

Enbridge (ENB.TO) 6.25% yield

Enbridge clients enter into 20-25- year transportation contracts. The company is already well positioned to benefit from the Canadian oil sands (as its Mainline covers 70% of Canada’s pipeline network). Now that is has merged with Spectra, about a third of its business model will come from natural gas transportation. The company has a handful of projects on the table or in development. Among those projects is the Line 3 replacement. The company expects the completion of this project in mid-2019. There are still regulatory processes to be completed, but this one could become a real growth driver.

Lassonde Industries (LAS.A.TO) 1.00% yield

A 1% yield in a retiree portfolio? Really? As much as I considered higher yielding companies, I think it’s important to add better diversification across this selection. Lassonde’s wide variety of brands enables it to occupy an important space in grocery stores. There aren’t many consumer products in Canada with such great metrics. LAS will continue to surf on many healthy products and to generate enough cash flow for future acquisitions. LAS recently completed a cost reduction program which should result in margin expansion. Lassonde may seem fairly valued according to the DDM, but this should change when management announces another dividend raise in mid-2018. Speaking of which, the dividend payment is healthy, and you can expect double-digit growth for the next decade.

CT Real Estate Investment Trust (CRT.UN.TO) 5.53% yield

I really like Canadian Tire in the Canadian investment landscape. Since CTC.A.TO pays only 2%, I decided to go with its spun-off REIT hosting their stores instead. Canadian Tire is a strong retailer with some unique advantage to fight against online giants such as Amazon. First, it owns several of its brands (and it just bought Bauer last week) providing them the exclusivity and full control over a good part of their products. Second, Canadian Tire is a loved brand by Canadians and will continue to attract many clients. Third, it also offers an online selling platform to ensure it doesn’t miss the internet boat. For all these reasons, CT REIT is probably one of the safest retail REIT in Canada.

Cineplex (CGX.TO) 5.21% yield

Cineplex had a difficult 2017. The company is working on transforming its business model toward a complete entertainment service instead of highly depending on Hollywood. As Cineplex evolved its business model toward more premium services, it enjoys not only a huge market share, but is able to generate interesting margins. Cineplex is also in line with its time with a successful online streaming platform. Finally, CGX is gradually building a serious bond with its clients through the SCENE loyalty program. From 600,000 members in 2006, SCENE now counts 7,9 million members.

Final Thoughts

This portfolio would generate a 4.50% yield. This means a retiree with $1M in hand could have $50K in cash to cover the upcoming year and receive $42,750 per year in dividend. Most companies would likely increase their payout enough to keep up with inflation. Therefore, a young retiree could easily live with $50K per year for the next 30 years with such a portfolio.

To be honest, I would probably increase the number of holdings to 30 for a $1M portfolio. 10 companies is not enough to ensure a full diversification. Imagine that Cineplex continues to go wrong. With a 10% weight, it would certainly affect our young retiree’s sleep. Since it’s not easy to find generous companies in different sectors solely in Canada, I’ll dedicate my next article on the top 10 U.S. retirement stocks.

What do you think? Do you have any holding that wasn’t part of this list?

Disclaimer: long all stocks mentioned besides CRT.UN in my DSR portfolios

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