The primary rule for retirement plans is to conserve assets. It’s essential to protect your principal. Growth is important, of course, but if you suffer heavy losses you may never recover them, cautions Gordon Pape, editor of The Income Investor.

Nothing goes up forever. But ask yourself this question: “Is this security likely to be worth more five or ten years from now than it is today?” If the answer is yes, it’s a candidate for your plan. Remember, you’re investing for the long term. Time is on your side.

Here are three securities to get you started. I would be astonished if they are not more expensive in five years than you’d pay now. Plus, they all offer dividends, thereby adding cash flow to your plan.

Fortis Inc. (FTS)

Utility stocks are the perfect security for retirement plans. Most of their income is regulated, which means a steady increase in cash flow to keep up with expenses and ensure the company is viable. A failed utility is unimaginable. Consider the reaction if all the lights went out in your city because the hydro company couldn’t pay its bills. It won’t happen.

We have several good utilities from which to choose in Canada, but I keep returning to Fortis as my number one choice because of its stability, international exposure, and its long history (approaching 50 years) of annual dividend increases.

The company is based in St. John’s, Newfoundland and Labrador. It’s a regulated electric and gas utility with 2021 revenue of $9.4 billion and total assets of $64 billion as of Sept. 30, 2022. It has 9,100 employees and serves customers in five Canadian provinces, nine US states and three Caribbean countries.

Royal Bank (RY)

Meanwhile, Canada’s banking system is very different from that of the US, UK, or almost anywhere else in the Western world. Where else would you find an oligopoly of five banks that basically control the whole system? Yes, there are some bit players, but none has any real clout.

That puts the Big Five in the “too big to fail” category. Royal Bank tops the list with a market cap of more than $190 billion and is about to get even bigger if its bid to acquire HSBC’s Canadian assets is approved.

Bank stocks didn’t fare very well in 2022. The rapid rise in interest rates, falling equity and bond markets, and recession fears drove investors elsewhere.

But investors have discovered banks were oversold and are buying back in. You can still buy shares in Royal Bank for less than they were a year ago at this time and receive a higher yield as well. What more could you want for your retirement plan?

Canadian National Railroad (CNI)

Railroads have seen many technological upgrades over time, of course, but it still comes down to an engine pulling a line of cars along a steel track — and doing so very profitably.

Renowned investor Warren Buffett likes railroads so much that be bought Burlington Northern and Santa Fe for Berkshire Hathaway (BRK.B). Canadian Pacific is about to assume control of Kansas City Southern. If another railroad said it would consider bids, the line-up of potential buyers would extend for blocks.

That brings me to Canadian National Railroad. It has been a recommendation of mine since May 2002 when we advised buying it at what now seems the absurdly low price of $12.98 (split-adjusted). The shares now sport a gain of 1,138% over that time, not including dividends.

Despite all the economic headwinds, 2022 was no expectation; the company reported annual revenue of $17.1 billion, up 18%. The company is not a big dividend payer in terms of yield at 2%. But the company has a history of annual dividend hikes, so consider that a small bonus to capital gains potential.

There you have it; with Fortis, Royal Bank, and CN Rail as the core of a retirement savings plan, you’re unlikely to go wrong.

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