Retiring in Canada? Create $1,000 a Month in Dividend Income to Supplement CPP

If you’re planning to retire in Canada, relying solely on government benefits won’t provide the lifestyle most retirees want. While the Canada Pension Plan (CPP) is an important foundation, it was never designed to cover all your expenses. That’s where dividend income can play a powerful supporting role.

As of recently, the maximum CPP benefit at age 65 was about $1,433 per month. However, the average retiree received only $848.37. With housing, food, utilities, and healthcare costs steadily rising, that gap can feel uncomfortably wide. Generating an additional $1,000 per month in dividend income — or $12,000 annually — can meaningfully improve your financial flexibility in retirement.

The good news? With the right strategy and time on your side, that goal is very achievable.

Why dividend income matters in retirement

Dividend income is especially attractive for Canadian retirees because it can provide a predictable cash flow without selling investments. Unlike withdrawing from savings, dividends allow your portfolio to continue working for you while delivering regular income.

In taxable accounts, eligible Canadian dividends also benefit from the dividend tax credit, making them more tax-efficient than interest income. Combined with CPP and Old Age Security (OAS), dividends can help smooth out your cash flow and reduce the stress of market volatility during retirement.

The key question is, How do you build that $1,000-per-month dividend stream?

The ETF approach: Simplicity and instant diversification

For retirees who value simplicity and broad diversification, dividend-focused exchange-traded funds (ETFs) can be an excellent starting point. Instead of selecting individual stocks, you gain exposure to dozens of established dividend payers in a single investment.

One popular option is Vanguard FTSE Canadian High Dividend Yield Index ETF (TSX: VDY). With nearly $5.3 billion in assets, it holds a diversified mix of Canada’s largest banks, insurance companies, and energy producers. The ETF pays monthly distributions and recently yielded about 3.36%.

At a recent price of approximately $61.52 per unit, generating $12,000 in annual income would require an investment of roughly $357,000. That’s a significant amount, but in return, you receive diversification, professional index construction, and minimal maintenance.

It’s important to remember, however, that ETFs are not immune to market swings. Like the broader Canadian market, VDY has risen sharply over the past year — gains that won’t necessarily repeat annually. Income-focused investors should still be prepared for volatility.

The stock-picking route: Higher yield, more involvement

For investors willing to take a more hands-on approach, carefully selected individual stocks can produce higher income with less capital. One good example is Canadian Natural Resources (TSX:CNQ).

CNQ is a large, well-established oil and gas producer with a dividend-growth streak spanning more than two decades. Its dividend-growth rates across one-, five-, 10-, and even 20-year periods all exceed 15%, reflecting strong cash generation and disciplined capital allocation.

After a recent dip, the stock trades around $45.44, offering a yield near 5.2%. At that level, generating $12,000 annually would require an investment of about $232,000. Notably, CNQ pays dividends quarterly rather than monthly. 

While it requires more work to build your own dividend stock portfolio to target a higher yield, doing so can significantly lower the capital required to generate the same income as an ETF, as this article illustrates. With this approach, you can target Dividend Aristocrats and even make a reasonable projection of your dividend growth.

Investor takeaway

No matter which approach you choose, the most important factor is planning ahead. Investing well ahead of retirement — especially during market pullbacks — allows risks to play out and locks in higher starting yields. Over time, dividend income can become a reliable supplement to CPP, helping you enjoy retirement on your own terms.

The post Retiring in Canada? Create $1,000 a Month in Dividend Income to Supplement CPP appeared first on The Motley Fool Canada.

Should you invest $1,000 in Canadian Natural Resources right now?

Before you buy stock in Canadian Natural Resources, consider this:

The Motley Fool Stock Advisor Canada analyst team identified what they believe are the 15 best stocks for investors to buy now… and Canadian Natural Resources wasn’t one of them. The 15 stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 … if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $21,105.89!*

Now, it’s worth noting Stock Advisor Canada’s total average return is 95%* – a market-crushing outperformance compared to 72%* for the S&P/TSX Composite Index. Don’t miss out on our top 15 list, available when you join Stock Advisor Canada.

See the 15 Stocks #start_btn6 { background: #0e6d04 none repeat scroll 0 0; color: #fff; font-size: 1.2em; font-family: 'Montserrat', sans-serif; font-weight: 600; height: auto; line-height: 1.2em; margin: 30px 0; max-width: 350px; text-align: center; width: auto; box-shadow: 0 1px 0 rgba(0, 0, 0, 0.5), 0 1px 0 #fff inset, 0 0 2px rgba(0, 0, 0, 0.2); border-radius: 5px; } #start_btn6 a { color: #fff; display: block; padding: 20px; padding-right:1em; padding-left:1em; } #start_btn6 a:hover { background: #FFE300 none repeat scroll 0 0; color: #000; } @media (max-width: 480px) { div#start_btn6 { font-size:1.1em; max-width: 320px;} } margin_bottom_5 { margin-bottom:5px; } margin_top_10 { margin-top:10px; }

* Returns as of November 17th, 2025

More reading

• TFSA: 3 Top TSX Stocks for Your $7,000 Contribution
• 3 Dividend Growth Stocks to Buy With Yields of 3% or More
• Which Dividend Stocks in Canada Can Survive Rate Cuts?
• Should Investors Dump Enbridge Stock and Buy This Dividend Champ Instead? 
• My Top Picks: 4 Canadian Dividend Stocks You’ll Want in Your Portfolio

Fool contributor Kay Ng has no position in any of the stocks mentioned. The Motley Fool recommends Canadian Natural Resources. The Motley Fool has a disclosure policy.