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TFSA Investors: 2 Dividend Stocks to Build a Mini Pension

Joey Frenette
Retirement plan

You’ve been paying your CPP dues, but if you’re a younger investor, you shouldn’t expect a pension that’ll be able to support a comfortable lifestyle in your golden years.

As such, you should treat your pension as an income supplement, not as a primary income source in retirement to avoid disappointment down the road when you discover how skinny your pension payments will be.

So, if you’re looking to set yourself up with a comfortable retirement, you’re going to have to go the extra mile and turn your TFSA into an income stream that can finance a comfortable retirement that doesn’t involve extreme frugality.

When constructing a mini-pension fund, you should look to stocks that offer stable, growing dividends and a price of admission that won’t break the bank. Here are two that look compelling as we head into year-end.

Toronto-Dominion Bank

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) stock had its relief rally cut short thanks in part to the recent broker sell-off sparked by the Charles Schwab’s decision to axe trading commissions on stocks and ETFs. While a great move for the DIY investor community, TD Ameritrade took a beating, with shares plunging around 30% in subsequent trading sessions, as the discount broker quickly matched its rival with $0 commissions of its own.

TD Bank shares took a beating amid Canadian banking headwinds, and the recent implosion of TD Ameritrade (partially owned by TD Bank) was just salt in the wounds of a premier bank that can’t seem to catch a break.

With a 4% yield and one of the most conservative loan books in the Canadian banking scene, TD Bank remains one of the timeliest dividend bets as credit looks to normalize.

Intact Financial

Intact Financial (TSX:IFC) is a Canadian property and casualty insurer that’s been on a tear this year with shares up nearly 40% year to date.

With a 2.3% dividend yield, the financial isn’t the most attractive play to income investors, but when you consider the magnitude of dividend growth that’s on the horizon, Intact looks like a prudent bet for those who want their income streams to receive frequent raises.

For those unfamiliar with Intact, it’s behind a bunch of well-known brands, including Belair, Brokerlink, and OneBeacon. The insurer has been an industry leader on the profitability and efficiency front, as fellow Fool Kay Ng noted in their prior piece.

While Intact is one of the best Canadian insurance plays, the stock is a tad on the frothy side after its remarkable run. Shares trade at 18 times next year’s expected earnings, which is quite expensive, but you’ve got to pay a premium price tag for a premium stock, right?

It can’t hurt to get some skin in the game today, but I’d urge investors to keep a lookout for a better entry point, which could soon be in the cards.

Foolish takeaway

Unless you’re okay with barely scraping by in retirement, it’s in your best interest to build your own TFSA mini pension and not rely on CPP payments in your retirement. Nobody has your back in retirement but you, so look to blue-chip dividend plays like TD Bank and Intact Financial, which will have your back when you discover your CPP payments are slim.

Stay hungry. Stay Foolish.

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Fool contributor Joey Frenette owns shares of TORONTO-DOMINION BANK. Intact Financial is a recommendation of Stock Advisor Canada.

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