Three stocks to hold into retirement

These high-yielding stocks should continue to perform well for the long haul.

Robert Miehm 3 October, 2018 | 5:00PM
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Robert Miehm: If you’re an individual looking to add a few Canadian stocks into your retirement portfolio, with a 10 to 20-year time horizon, we’ve got some ideas you might want to consider.

Keep in mind, we are assuming that you’ve already got a well-thought-out retirement strategy, that takes into consideration your time horizon, withdrawal rates, willingness and ability to take on risk.

A few stocks worthy of consideration for a retirement portfolio might be the following: Royal Bank of Canada, BCE Inc. and Nutrien Ltd.

Royal Bank is currently a 3-star rated stock, with a wide moat and a 3.8% expected dividend yield. We should note here, that a stock’s star rating takes into consideration the stock’s current price, our estimate of its fair value, and the uncertainty rating of its fair value. If you're not familiar with how the star rating for stocks work, click on the link below.

The moat gives us an indication of a company’s strength and sustainability of its competitive advantage. We like Royal Bank because of its strong market share in banking and non-banking business lines, with good returns on equity, financial health and efficiency ratios.

A risk in holding the stock would be the turning of the housing market, and high debt levels among consumers, resulting in a greater likelihood of consumer defaults.

BCE Inc. is currently a 4-star rated stock, with a narrow moat and a 5.7% expected dividend yield. We think BCE has significant upside from here given its current valuation and its favourable position as a Canadian provider of wireline and wireless services.

Upside is expected to be driven by EBITDA margin expansion in its wireline segment, where BCE has a more significant presence because its network extends to about three quarters of Canada's population.

And finally, Nutrien is currently a 3-star rated stock, with a narrow economic moat and a 2.9% expected dividend yield. Nutrien was formed through of a merger between Potash Corporation of Saskatchewan and Agrium earlier this year, and is now the world’s largest crop nutrient company.

Nutrien holds a strong competitive position. They have approximately 1,600 retail locations worldwide, helping growers get their products to market. The company is the world’s largest potash producer, and also plays a significant role in the production of Nitrogen and Phosphate, used as crop fertilizers and a variety of other applications.

We expect strong earnings growth with Nutrien as demand for its products will rise as countries move to increase crop yields and secure food supply.

For Morningstar Investment Management, I’m Rob Miehm.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
BCE Inc44.82 CAD-0.80Rating
Nutrien Ltd69.60 CAD-1.02Rating
Royal Bank of Canada142.28 CAD-0.41Rating

About Author

Robert Miehm

Robert Miehm  Robert Miehm is a senior investment analyst with Morningstar Investment Management.

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