Investing for Retirement: Check Out These Dividend-Paying Stocks in Canada

The market downturn that occurred last year gave investors who did not recover from the crash of 2020 a new opportunity to buy more TSX dividend stocks at a cheap price.

Power of compounding

A popular strategy for building retirement wealth involves buying dividend growth stocks and using distributions to acquire new shares. The compounding effect is small in the beginning, but the long-term effect on the size of the retirement fund can be large.

Falling share prices enable dividends to buy more shares, and top dividend stocks that typically raise payouts each year are often rewarded with share prices that tend to rise over time.

Owning stocks is risky, and good companies sometimes have a lot of trouble, but most great dividend stocks with a long track record of dividend growth will provide patient investors with attractive total returns.

Bank of Montreal

Bank of Montreal (TSX:BMO) paid its first dividend in 1829. Since then, investors have received a distribution every year. That’s a good run considering all the economic and financial advances that have taken place over the past 200 years.

The Bank of Montreal used a large chunk of the cash hoard it built up during the pandemic to make a big bet in the United States. BMO Harris Bank, the American subsidiary, bought Bank of the West for US$16.3 billion.

The deal adds more than 500 branches and gives Bank of Montreal a strong foothold in California. The 2022 GDP (gross domestic product) of the state of more than US $ 3.5 trillion will place California as one of the top five economies on the planet if it is independent from the United States. The population of California is close to the population of Canada.

Bank of Montreal now has a presence in more than 30 American states, so it is positioned to benefit from the long-term growth of the US economy.

Bank of Montreal is trading near $122 per share at the time of writing. That’s off a 12-month high of nearly $137.

Investors who buy the dip can earn a 4.8% dividend yield. The Bank of Montreal raised the dividend when it reported the results of the fiscal second-quarter (Q2) 2023. The move suggests that the board is comfortable with the revenue and profit outlook, even if the banks are facing some economic problems.

Telus

Telus (TSX: T) is trading near $23.50 at the time of writing compared to more than $34 at last year’s high. The unusual decline in the share price is due to two factors. First, rising interest rates drive up borrowing costs for financing capital projects. Higher rates also make GICs more attractive for investors who often buy telecom stocks for their dividends.

Second, Telus International (TSX:TIXT), a subsidiary of Telus that provides call center and IT services to international businesses, is feeling the shock from declining revenues as global companies cut costs.

The coming quarters may be a little rocky, but the main driver of Telus’ revenue growth remains strong. Telus provides mobile and internet services to Canadian homes and businesses. These are essential services that are needed, regardless of the state of the economy.

Telus is probably oversold right now and offers an attractive 6.2% dividend yield. The company typically increases the dividend by 7-10% per year.

The bottom line is above dividend stocks to buy for a retirement fund

Bank of Montreal and Telus are good examples of Canadian dividend stocks that can be bought on a dip. If you have money to put to work in a self-directed pension fund, these stocks deserve to be on your radar.