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Yes, You Can Retire on Dividends: 3 Big Yields up to 8%

Increasing yield
Image source: Getty Images

Written by Andrew Button at The Motley Fool Canada

Have you ever wondered whether it’s possible to retire on dividends?

The truth is, it is, and it isn’t.

You can retire on dividends if you save hundreds of thousands of dollars. In this sense, the “passive-income dream” is achievable.

You can’t, however, retire on dividends in just a few years, starting with $0 or something close to it. Many online influencers promoting dividend stocks as “passive-income opportunities” are insinuating that something like the scenario I just described is possible. It isn’t.

But in principle, retiring on dividends is possible. To be clear, you’ll need several hundred thousand dollars to pull this off — minimum. But by investing in high-yield stocks, you can reduce the number of hundreds of thousands needed, to something manageable. In this article, I will explore three high-yield stocks that could pave the way to a wealthy retirement.

First National

First National Financial (TSX:FN) is a Canadian non-bank lender whose shares have a 6.5% dividend yield. Earlier this year, when the U.S. banking crisis was in full swing, it was possible to buy this stock at an 8% yield. Sadly, that opportunity has passed, but the yield currently on offer is still above average.


First National operates somewhat like a bank does. It issues mortgages to Canadians who want to buy homes. Unlike banks, it doesn’t have deposits, which means it doesn’t have to worry about “bank runs” as much as they do. It simply issues bonds to finance its mortgages.

This business model is working out pretty well for First National this year. In its most recent quarterly earnings release, it reported the following:

  • $142 billion in mortgages, up 10%.

  • $8.6 billion in new mortgages originated, up 26%.

  • $563 million in revenue, up 43%.

  • $83.6 million in net income, up 108%.

Overall, it was a pretty good showing. If First National can keep these results up, its dividend may go higher still!


Bank of Nova Scotia (TSX:BNS), otherwise known as Scotiabank, is a Canadian bank stock with a 6.94% yield. Much like First National Financial, it’s involved in issuing mortgages and other kinds of loans. Unlike FN, it’s also involved in other areas of financial services, like wealth management and insurance, and it has operations outside of Canada.

Scotiabank is pretty big in Latin America, which makes it different from the other Canadian banks, which have mostly sought their geographic diversification in the United States.

Unlike First National, Scotiabank’s last few earnings releases have not shown explosive growth. In fact, the company is barely growing at all: its earnings are down over the last five years and barely up over 10 years. It is what it is, but with a 7% yield, BNS stock may be worth it for the income alone.


Last but not least, we have Enbridge (TSX:ENB). The highest yielder on this list, it sports a 7.85% yield, which rounds up to 8%. Enbridge is a pipeline, meaning that it leases out its pipes to oil companies that need to transport their products. It hauls in tens of billions of revenue per year, helping businesses transport their oil to the United States this way. It also supplies 75% of Ontario’s natural gas.

Enbridge’s payout ratio is too high: it pays out 126% of its earnings as dividends. However, it earns enough distributable cash flow to cover the dividend. I’d guess that most investors buying Enbridge today will collect the dividend at the end of the day, but may not see a lot of dividend growth or capital appreciation. But with an 8% yield, do you need much of either?

The post Yes, You Can Retire on Dividends: 3 Big Yields up to 8% appeared first on The Motley Fool Canada.

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Fool contributor Andrew Button has no position in any of the stocks mentioned. The Motley Fool recommends Bank Of Nova Scotia and Enbridge. The Motley Fool has a disclosure policy.