Yield Scarcity and the Case for Dividends

Looking for cash flow to boost your current income or to help pay for your daily expenses in retirement? If so, traditional conservative strategies won't give you the results you need in this low-yield environment. At current rates, a money market investment would take 267 years* to double—and GICs and 10-year Government of Canada Bonds aren't faring much better.

Now is the time to talk to your advisor about using dividends to build your wealth.

*Based on Money Market yields of 0.26% as of June 30, 2012.
Source: Bloomberg.

How long will it take you to double your money?

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The purpose of this calculator is to demonstrate how long it could take to double your money, based on the interest rate on your current investment. Results are based on information supplied by you and the assumptions detailed below. While care is taken in preparation of this calculation, no warranty can be made as to its accuracy or applicability for any particular purpose. This calculator uses a logarithmic formula which first calculates the factor of exponential growth that would be required to double a single unit of measure, then determines the compound growth rate that the given interest rate will have on that investment, and finally divides the the exponential growth by compound growth rate to determine the number of years a given investment will take to double. Rates of return and distributions in this calculator are hypothetical and for illustration purposes only and are not indicative of any past or future fund performance or returns. Mutual fund returns are not guaranteed and past performance may not be repeated. Rates of return assume that all income distributions or dividends were reinvested in additional units and do not take into account sales, redemptions, distribution or optional charges payable by any security holder that would have reduced returns. Commissions, trailing commissions, management fees and expenses may all be associated with mutual fund investments. Please read the prospectus before investing. This calculator is intended for educational purposes based upon personalized input and is not meant as legal, tax or investment advice. Results are not to be construed as a solicitation to buy or an offer to sell, or a recommendation for, a security, or any other product or service. An investor should not act on the basis of this information without consulting their investment advisor or tax advisor with respect to the investor's specific situation.


Will Low-Yield Investments Produce the Return You're Looking For?


The rules have changed

What got you here won't get you there

In 1991, $150,000 in a 1-year GIC gave you enough cash flow to buy a new car. Today, the income earned on that same investment would only cover a set of tires.

 

What you could buy in 1991
What you can buy today

 

The rules have changed, and so must your investment strategy.


Source: GIC rates: Bloomberg. Value for 1991 Ford Escort: The Canadian Red Book, as of December 31, 2011

Safety has a price

Are you getting paid while you wait?

Safety has a price. Investors who have chosen to wait out volatility in "no-risk" investments are losing ground to inflation, at a rate of 1.5% per year1. And investors who avoid equities risk seeing their long-term plans fall apart.

Mutual funds made up of dividend-paying stocks can help you get back on track.

Looking back at the last decade, the average dividend yield from companies in the S&P/TSX Composite Index was almost 56% higher than that of 10-Year Government Bonds (3.09% vs. 1.74%). The picture's even brighter outside Canada. The average dividend paid by Asian banks was over 5.2%2 during that period, and European telecoms averaged nearly 7.5%3.

Not only can dividend-paying stocks outpace yields from traditional fixed income, they give your portfolio the potential to grow.

1 - As of June 30, 2012. Source: Statistics Canada.
2 - Source: MSCI Pacific Index, Financials.
3 - MSCI Europe Index, Telecommunication Services.

Dividends on the rise

Two reasons dividends may be on the rise

1. Companies are holding record amounts of cash
The recession forced many companies to cut their costs. As a result, many stockpiled record levels of cash.

As shareholders demand those companies put that cash to work, we may see bigger dividends, which can often boost share prices.

2. History favours a return to the mean
Over the last 30 years, S&P/TSX listed companies had been paying 55% of their earnings as dividends. Last year, that ratio fell to 43%. A return to the historic average would result in much higher dividends paid to shareholders.

Source: Bloomberg, as at June 30, 2012.


Materials

The Case for Dividends
Are you getting paid
while you wait?

Read now

 

Franklin Bissett Strategic Income Fund

Asset allocation, monthly income, and strong risk/return potential. Franklin Bissett Strategic Income Funds offers all three, and gives investors the comfort of knowing their basic cash flow needs can be met without sacrificing their downside protection.

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 Franklin Bissett Strategic Income Report
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Franklin Bissett Dividend Income Fund  

With a healthy mix of dividend-paying stocks and the stability of bonds, Franklin Bissett Dividend Income Fund provides capital appreciation potential and consistent dividends over time.

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 Reap the Dividends Sales Tool
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Important Legal Information

Source: Morningstar Research Inc., as of September 30, 2012. All rights reserved. The information contained herein is proprietary to Morningstar and/or its content providers; may not be copied or distributed; and is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. The Morningstar Risk-Adjusted Rating, commonly referred to as the Star Rating, relates the risk-adjusted performance of a fund to that of its category peers and is subject to change every month. The Star Rating is a measure of a fund's annualized historical excess return (excess is measured relative to risk-free investment in Canadian Government Treasury Bills) adjusted for the fund's historical risk. The overall Star Rating for a fund is a weighted combination of its three, five, and ten year ratings. Overall ratings are adjusted where a fund has less than five or ten years' history. All performance data refers to Series A units. A fund scoring in the top 10.1 to 22.5% 10% of its fund category receives 4 stars. Franklin Bissett Dividend Income Fund is rated within the Morningstar Canadian Equity Balanced category. For each of the For each of the 3 and 5 year performance periods, there were in total 176, 137 and 56 funds, respectively, in the Morningstar Canadian Equity Balanced category. Please refer to www.morningstar.ca for more details on the calculation of Morningstar Risk-Adjusted Ratings and for the 1-year information.

Franklin Bissett Canadian Dividend Fund  

By investing in high quality businesses and participating in their long-term earnings and dividend growth, Franklin Bissett Canadian Dividend Fund seeks to provide investors with above-average total return and below-average volatility.

Visit the product page
Resources
 Reap the Dividends Sales Tool
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Important Legal Information

Source: Morningstar Research Inc., as of September 30, 2012. All rights reserved. The information contained herein is proprietary to Morningstar and/or its content providers; may not be copied or distributed; and is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. The Morningstar Risk-Adjusted Rating, commonly referred to as the Star Rating, relates the risk-adjusted performance of a fund to that of its category peers and is subject to change every month. The Star Rating is a measure of a fund's annualized historical excess return (excess is measured relative to risk-free investment in Canadian Government Treasury Bills) adjusted for the fund's historical risk. The overall Star Rating for a fund is a weighted combination of its three, five, and ten year ratings. Overall ratings are adjusted where a fund has less than five or ten years' history. All performance data refers to Series A units. A fund scoring in the top 10.1 to 22.5% 10% of its fund category receives 4 stars. Franklin Bissett Canadian Dividend Fund is rated within the Morningstar Canadian Dividend & Income Equity category. For each of the 3 and 5 year performance periods, there were in total 273 and 168 funds, respectively, in the Morningstar Canadian Dividend & Income Equity category. Please refer to www.morningstar.ca for more details on the calculation of Morningstar Risk-Adjusted Ratings and for the 1-year information.

Franklin Bissett Canadian High Dividend Fund  

With a focus on companies that pay regular dividends and have consistently grown their profits, Franklin Bissett Canadian High Dividend Fund offers investors high levels of consistent income and great growth potential.

Visit the product page
Resources
 Fund Story
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Important Legal Information

Source: Morningstar Research Inc., as of September 30, 2012. All rights reserved. The information contained herein is proprietary to Morningstar and/or its content providers; may not be copied or distributed; and is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. The Morningstar Risk-Adjusted Rating, commonly referred to as the Star Rating, relates the risk-adjusted performance of a fund to that of its category peers and is subject to change every month. The Star Rating is a measure of a fund's annualized historical excess return (excess is measured relative to risk-free investment in Canadian Government Treasury Bills) adjusted for the fund's historical risk. The overall Star Rating for a fund is a weighted combination of its three, five, and ten year ratings. Overall ratings are adjusted where a fund has less than five or ten years' history. All performance data refers to Series A units. A fund scoring in the top 10.1 to 22.5% 10% of its fund category receives 4 stars. Franklin Bissett Canadian High Dividend Fund is rated within the Morningstar Canadian small/mid-cap Equity category. For each of the 3, 5 and 10 year performance periods, there were in total 162, 120 and 51, respectively, in the Morningstar Canadian small/mid-cap Equity category. Please refer to www.morningstar.ca for more details on the calculation of Morningstar Risk-Adjusted Ratings and for the 1-year information.

 
Important Fund Notes

† Effective July 29, 2013, Bissett Strategic Income Fund was renamed Franklin Franklin Bissett Strategic Income Fund.
Effective July 29, 2013, Bissett Dividend Income Fund was renamed Franklin Franklin Bissett Dividend Income Fund.
Effective July 29, 2013, Bissett Canadian Dividend Fund was renamed Franklin Franklin Bissett Canadian Dividend Fund.
Effective July 29, 2013, Bissett Canadian High Dividend Fund was renamed Franklin Franklin Bissett Canadian High Dividend Fund.

Note: Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Franklin Bissett Investment Management is part of Franklin Templeton Investments Corp.

What are yields?

Yield is the income return on an investment. Even if you're just looking for a safe place to park your cash, you'll likely want yields higher than __%, the current rate of inflation**.

What are dividends?

A dividend is a payout of a portion of a company's earnings. Many companies pay reliable dividends, whatever the market conditions. The dividend gives investors a compelling reason to stay, even when the stock's not climbing.

Juliet John: Digging into dividends