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.

GIC - For more information about this product, please contact your Investment Advisor.   This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change. CIBC and CIBC World Markets Inc., their affiliates, directors, officers and employees may buy, sell, or hold a position in securities of a company mentioned herein, its affiliates or subsidiaries, and may also perform financial advisory services, investment banking or other services for, or have lending or other credit relationships with the same. CIBC World Markets Inc. and its representatives will receive sales commissions and/or a spread between bid and ask prices if you purchase, sell or hold the securities referred to above. © CIBC World Markets Inc. 2023.   CIBC Private Wealth consists of services provided by CIBC and certain of its subsidiaries, including CIBC Wood Gundy, a division of CIBC World Markets Inc. The CIBC logo and “CIBC Private Wealth” are trademarks of CIBC, used under license. “Wood Gundy” is a registered trademark of CIBC World Markets Inc.   Lois Smith and Rodney Falconer are Investment Advisors with CIBC Wood Gundy in Toronto. The views of Lois Smith and Rodney Falconer do not necessarily reflect those of CIBC World Markets Inc.   Clients are advised to seek advice regarding their particular circumstances from their personal tax and legal advisors.   If you are currently a CIBC Wood Gundy client, please contact your Investment Advisor.    Picture/iStock/Getty Images Plus

SFFG Insights

Smith Falconer Financial Group

October 22, 2023

Dividends

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