CPP Benefits Not Enough? This Top Dividend Stock Can Help Fund Your Retirement

Did you know that your Canada Pension Plan (CPP) benefits are not enough to fund your retirement?

Or are you nearing retirement and worried your benefits won’t be enough?

If so, you have several ways to increase your income. If you are close to retirement, you can delay it, and perhaps work more hours if you are below the maximum pension amount. When you are retired, you may want to consider investing some of your savings to increase your CPP withdrawal. The standard way to do this is to invest in a combination of stock and bond index funds to earn cash flow.

If you want to improve your investment portfolio with individual stocks, read on, because in this article, I will examine a stock that gives its investors a lot of dividend income.

Fortis

Fortis (TSX:FTS) is a Canadian utility stock with a 4% dividend yield. At a 4% yield, you will receive $4,000 in annual cash back for every $100,000 invested. Not only that, but Fortis’s dividend has been growing over time.

For the past 49 years, Fortis has consistently raised its dividend. In fact, it has raised the fee every 49 years! This is one of the best dividend track records in the TSX stock market index. If Fortis pulls off another dividend hike this year, it could become the Dividend King – a stock with 50 years of dividend hikes. It will benefit shareholders by having FTS participate in dividend growth funds and other such pooled investment vehicles.

Why is it so reliable

Fortis’s dividend growth is reliable for two reasons:

1. The built-in advantages enjoyed by all utilities.
2. Some specific decisions taken by the management of Fortis.

First, let’s talk about the built-in advantages. Utilities are essential services. They are tied to someone’s house. You don’t just “out” the heat and light bill; you need it. So, people continue to pay their heat and light bills, even in recessions. Most people would rather sell their cars than stay cold in the winter.

Second, Fortis is investing heavily in growth. It has spent the past few decades buying up utilities across Canada, the US, and the Caribbean. It is working on a capital expenditure plan to increase its rate base. All of these investments led to FTS outperforming the TSX utilities sub-index.

Can it achieve annual dividend growth?

In reviewing the last few decades of Fortis’ results, it is time to answer the important question:

Can it achieve annual dividend growth?

In my opinion, yes, it can. Fortis’ growth in revenue and earnings has been positive this year. It usually announces dividends with its September earnings release, which is just around the corner. It will likely report higher earnings for the full 12-month period, regardless of what happens in the third quarter. As a result, it can increase the dividend without increasing its payout ratio. So, I would expect a 6% dividend increase, which is in line with the company’s long-term goals.