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.
Will Low-Yield Investments Produce the Return You're Looking For?
- The rules have changed
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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
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Are you getting paid while you wait?
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.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.
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
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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
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The Case for Dividends |
Bissett Strategic Income Fund
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Asset allocation, monthly income, and strong risk/return potential. 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. Visit the product page |
Resources Bissett Strategic Income Report A Strategic Approach to Income Fund Fact Sheet |
Bissett Dividend Income Fund 
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With a healthy mix of dividend-paying stocks and the stability of bonds, Bissett Dividend Income Fund provides capital appreciation potential and consistent dividends over time. Visit the product page |
Resources Reap the Dividends Sales Tool Fund Fact Sheet |
Bissett Canadian Dividend Fund
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By investing in high quality businesses and participating in their long-term earnings and dividend growth, 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 Fund Fact Sheet |
Bissett Canadian High Dividend Fund 
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With a focus on companies that pay regular dividends and have consistently grown their profits, Bissett Canadian High Dividend Fund offers investors high levels of consistent income and great growth potential. Visit the product page |
Resources Fund Story Fund Fact Sheet |
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. Bissett Investment Management is part of Franklin Templeton Investments Corp.