Smith Falconer Financial Group
October 22, 2023
Dividends
5% is the magic number for some investors…
With that yield now attainable from GICs and bonds, some investors are weighing the risks of dividend income against current interest rates.
In this environment where high interest rates are winning the battle against dividend paying stocks, selling pressure has created tax-effective dividend yields of 6-8% in many long standing, “blue chip” names.
In The Globe and Mail on Saturday, October 14th, Rob Carrick’s opinion piece discussed the opportunity at hand. He emphasized that investors who have confidence in a long-term approach during this time will be rewarded as interest rates decline and money begins to flow back into these companies.
This reward is in the form of the potential for both share price appreciation and dividend growth. Fixed-income products do not offer the same potential for growth, and as dividend income is taxed more favourably than interest income, dividend paying stocks include an added benefit of tax-efficiency, leaving more money in investors’ pockets.
We encourage Globe and Mail subscribers to take a second read of it at this link: "The carnage in dividend land is an epic buying opportunity, if you can wait".
For the investor with patience and time, the current set-up may be once in a lifetime.
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