Are you finding that your CPP benefits aren't enough?

You're not alone. The average Canadian retiree only receives about $700 per month in CPP benefits, not nearly enough to live off of in retirement. Even if you have an above-average CPP cheque â such as the $1,305 that can be obtained by earning the maximum pensionable amount and waiting until age 65 â you probably still aren't earning enough to live off of.

It's for this reason that it's wise to invest during (and before) your retirement. By investing in an RRSP and a TFSA, you can slowly build up an income stream that pays you more than you earn in CPP benefits. In this article, I will explore one TSX stock that could make a good RRSP/TFSA holding.

Fortis

Fortis Inc (TSX:FTS) is a Canadian dividend stock with a 4.3% dividend yield. If you invest $100,000 into FTS stock, you get $4,340 back in dividends per year, if the payout doesn't change. Over the years, Fortis' dividend has changed: it has increased 50 years in a row! This fact makes Fortis a "Dividend King," one of the rarest distinctions in the stock market.

A personal story about Fortis stock

Growing up in Newfoundland, I knew many people who invested their entire RRSP or kids' tuition fund into Fortis stock. It worked out surprisingly well, with the stock having outperformed the TSX over many decades. Despite the textbook orthodoxy that you need to diversify widely, very thorough analysis can sometimes identify a stock that has what it takes to outperform.

In Fortis' case, this comes down to the fact that it's simply a well-run utility. Utilities have very stable revenue streams: they don't have to scramble for new customers, because customers are locked in for long periods of time. That's a major advantage. However, not all utilities capitalize on it. Some pay out too much in dividends, some neglect to invest in growth and expansion. Fortis has avoided both temptations. It has never had a payout ratio above 90% â the ratio is currently 79%. It's also been no slouch on growth, having invested considerably in expansion in Canada, the U.S., and the Caribbean.

Is it still as good today?

Having explored Fortis' illustrious history, it's time to ask the question:

Is it still a buy today?

Well, it's still a best-in-class Canadian utility. Most Canadian utilities are burdened with above-100% payout ratios while having negative growth in both revenue and earnings. Fortis' earnings are up a little over the last five years, so the company is beating its peers.

As for whether utilities as a class are good buys: that depends on interest rates. Utilities, including Fortis, are heavily indebted, which results in them having high interest expenses when rates are high. Just today, Statcan put out a release showing that inflation slowed to 2.7% in June, so there's hope the Bank of Canada may continue cutting rates. If it does so, then FTS stock will prove to have been a buy at today's prices.

The post CPP Benefits Not Enough? This Top Dividend Stock Can Help Fund Your Retirement appeared first on The Motley Fool Canada.