High-Yield Equity Investment Alternative
In today's low interest rate environment, traditional fixed income investors may be inclined to seek alternative instruments providing potentially higher returns. An excellent alternative that should be given serious consideration is high-yield equities. We define this group as Canadian blue chip common stocks that offer investors both tax-efficient cash dividends, and excellent potential for long-term capital appreciation. Realizing capital gains may, over time, provide investors with some of their income needs, while still maintaining initial portfolio values.
High-yield equities include the common stocks of banks, utilities, and pipeline companies. These are large, well-capitalized corporations with a history of regular dividend payments. In some cases, dividend payouts have been increased on a year-over-year basis, reflecting long-term earnings growth and financial stability.
Individual and corporate investors also benefit from the more favourable tax treatment given to Canadian dividends over interest income. This allows investors to retain more of their income after tax.
An additional benefit of high-yield equities is that they are generally considered a safe haven in times of market turbulence. The regular dividend payments provide a solid valuation base, which serves as a shock absorber in volatile conditions.
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The information contained herein is considered accurate at the time of posting. CIBC and CIBC World Markets Inc. reserve the right to change any of it without prior notice. It is for general information purposes only.
Clients are advised to seek advice regarding their particular circumstances from their personal tax advisors.