Six-per-cent dividend yields from blue chip stocks are there for the taking

With stocks falling, it’s a great time to be an income-focused dividend investor.

As stocks dropped yet again this week, I took a look at dividend yields for the big blue chips in the S&P/TSX 60 index. Yields of 6 percent and higher were available from eight companies, each with a good record of dividend growth over the past five years. One more company had a yield of 5.9 percent.

Once again, we are reminded of a positive side of falling stocks. As share prices fall, dividend yields climb to levels that beat even today’s elevated returns from guaranteed investment certificates and bonds. The after-tax return is even better in a non-registered account, where the dividend tax credit applies.

Stock market volatility is a given these days, but the ups and downs this fall seem to have reached a new level. Stock market rallies can push yields down below arbitrary thresholds like 6 percent, lately we’ve seen uptrends quickly retreat. Track the dividend stocks you’re following with a Globeinvestor Watchlist, then use the dividend view to monitor yield, one- and five-year returns and five-year dividend growth.

Enbridge Inc. (ENB-T)

My TSX 60 watchlist ranked Enbridge Inc. (ENB-T ) high on the yield list at 6.9 percent, a high number that reflects investor concerns about the company that includes the sustainability of its dividend.

Algonquin Power and Utilities Corp. (AQN-T)

Also at 6.9 percent was Algonquin Power and Utilities Corp. (AQN-T ). AQN shares have fallen hard lately for reasons that include rising interest rates. Higher rates increase the cost of servicing the company’s debt, and they also weigh on the price of utility stocks in general.

TC Energy Corp. (TRP-T ) was next, with a yield of 6.6 percent, followed by BCE Inc. (BCE-T ) at 6.5 per cent. A recent Globe and Mail article pointed out that a yield of 6 percent for BCE shares has in the past been a buy signal. Alongside BCE was at 6.5 percent Power Corp. of Canada (POW-T).

Bank stocks with a 6-percent yield are a rarity, but Bank of Nova Scotia (BNS-T ) was perched at 6.4 percent as of earlier this week. An alternative choice among financials was Manulife Financial Corp.(MFC-T), at 6.2 percent.

Rounding out the eight stocks at 6 percent or more was Pembina Pipeline Corp. (PPL-T ), at 6.2 percent. Just a hair below that yield threshold was Canadian Imperial Bank of Commerce (CM-T ).

Yields of 5 to 6 percent and more for blue chips are a sign of investor unease, so none of these stocks are anything close to risk-free. The blue chips that have cut dividends in past decades include TC Energy, Manulife and Telus Corp. (T-T ), which this week had a yield of 4.9 percent.

Still, all stocks mentioned above have increased their dividends over the past five years by annualized rates that range from 10 percent for AQ to 4.2 percent for CM. If you’re going to buy stocks on sale, a record of dividend growth is a good place to start your research.

Photo by Ilya Cher on Unsplash