Dividends rarely get the respect they deserve, especially from beginning investors. That’s because a dividend paying stock’s yearly 2% or 3% or 5% yield barely seems worth mentioning alongside yearly capital gains of 10%, 20% or 30% or more.
But dividends are far more reliable than capital gains. A stock that pays a dividend of $1 this year will probably do the same next year. It may even raise it to $1.05.
So with today’s low interest rates, investors are paying more attention to dividend yields (a company’s total annual dividends paid per share divided by the current stock price). The best dividend stocks respond by doing their best to maintain, or even increase, their payouts.
A couple of decades ago, you could assume that dividends would contribute up to a third of your long-term investment returns, even without the tax-cutting effects of the dividend tax credit.
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In the early years of the past decade, dividend yields were generally too low to provide a third of investment returns. But since yields have moved up and interest rates remain low, it’s realistic to assume they will again contribute as much as a third of your total return.
You should also keep these two key points in mind:
Dividends can grow. Stock prices rise and fall. That means capital losses often follow capital gains, at least temporarily. Interest on a bond or GIC holds steady, at best. But the best dividend stocks like to ratchet their dividends upward — hold them steady in a bad year, and raise them in a good one. That gives you a hedge against inflation.
Dividends are a sign of investment quality. Some good companies reinvest profit instead of paying dividends. But fraudulent and failing companies hardly ever pay dividends. So if you only buy stocks that pay dividends, you’ll automatically stay out of almost all the market’s worst stocks.
For a true measure of stability, focus on companies that have maintained or raised their dividends during recessions and stock market downturns. These firms leave themselves enough room to handle periods of earnings volatility. By continually rewarding investors, and retaining enough cash to finance their businesses, they provide an attractive mix of safety, income and growth.
How we select the best dividend stocks for our Safety-Conscious Portfolio
While we recommend that you spread your investments out across the five main economic sectors, the proportion you devote to each sector depends on your temperament and financial goals.
If you’re an income investor, you may wish to place more emphasis on utilities and Canadian banks. That’s because these firms generally pay high, secure dividends.
For example, you could pick from the companies in our Canadian Wealth Advisor newsletter’s Safety-Conscious Stock Portfolio. It’s one of the three portfolios in the newsletter (the others are our Trust & REIT Portfolio and our ETF Portfolio).
The 18 stocks in the Safety-Conscious Portfolio are those we consider the best dividend stocks for investors who seek gains with the least risk. Nine of them come from the Utilities and Canadian Finance sectors. However, you’ll still want to make sure your portfolio is well-diversified within each sector.
You can get our all three of our Canadian Wealth Advisor portfolios, including our Safety-Conscious Stock Portfolio, when you try the newsletter today. Best of all, you get one month free when you subscribe now. Click here to learn how.
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We do not collect or disclose personal information, except when it is provided to us voluntarily by the site/store visitor with their consent.
We store subscriber and password files containing personal information securely. These files are stored in secure areas that are not accessible to the general public. We are always working to ensure the security of your personal information.
What personal information do we collect?
The information we receive from customers helps us personalize and continually improve your online experience at TSI Network. TSI Network may collect personal information online for all legal purposes, which include, but are not limited to:
Information You Give Us: We receive and store any information you enter on our website or give us in any other way through sign-up forms or ordering forms for publications and services. You can choose not to provide certain information, but then you might not be able to take advantage of many of our services and features. We use the information that you provide for such purposes as responding to your requests, customizing your web browsing experience for you, improving our website, and communicating with you.
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Information from Other Sources: For reasons such as improving personalization of our service (for example, providing better product recommendations or special offers that we think will interest you), we might receive information about you from other sources and add it to our account information. We also sometimes receive updated delivery and address information from our shippers or other sources so that we can correct our records and deliver your next purchase or communication more easily.
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Although you may be able to access some of our websites without being required to register or provide personal information, certain websites and sections of our websites may require registration. In addition, if you choose to contact us to ask a question, we will collect your personal information so that we can respond to your question.
To make the visitor’s experience on our website easier, we may use per-session “cookies” (session identifiers) to track the state of the visitor session. This “cookie” is destroyed when your session with our website is over.
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Does TSI Network Use the Information It Receives?
"Contact Us" and Comment Features: TSI Network encourages visitors to its websites to contact us with questions and comments. Email addresses and other information of persons using these features may be collected in order to facilitate our responses to those inquiries.
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Except as provided herein, TSI Network will not sell or rent personal information about you to unaffiliated third parties.
We may disclose personal information you have provided through our websites, for the above purposes, to persons or companies that we retain to carry out and other activities for which you have registered or in which you have otherwise asked to participate. In particular, we may for these purposes transfer information to any country (including the USA and other countries which may not offer the same level of data protection as Canada). We also will disclose personal information if required by law, including compliance with warrants, subpoenas or other legal processes.
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Please note that we reserve the right to delete or edit all comments. As well, we may close posts to further comments at our discretion. If a user repeatedly abuses our comment policy, we may also revoke that user’s access to our comments section.
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TSI Network does everything possible to prevent unauthorized intrusion to its websites and the alteration, acquisition or misuse of personal information by unauthorized persons. Notably passwords submitted by users of our websites are encrypted using encryption mechanisms. However, TSI Network cautions visitors to its websites that no network, including the Internet, is entirely secure. Accordingly, we cannot be responsible for loss, corruption or unauthorized acquisition of personal information provided to our websites, or for any damages resulting from such loss, corruption or unauthorized acquisition.
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Changes to this Policy
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TSI Network may revise this Policy from time to time.
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