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
Algonquin Power and Utilities Corp. (AQN-T)
Also at 6.9 percent was Algonquin Power and Utilities Corp. (AQN-T
TC Energy Corp. (TRP-T
Bank stocks with a 6-percent yield are a rarity, but Bank of Nova Scotia (BNS-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
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.