In search of the best yields

Interest and dividends paid from investments are important parts of the investment's total returns. These yields come in many forms, sizes and taxable statuses. Yields can be a large contributor to total return from a bond, or contribute a much smaller percentage to total return in a stock, mutual fund or ETF.

Investing for yields has often been called the "widows and orphans" strategy, with visions of little old ladies clipping coupons at their banks. While many investors' strategies are constructed solely to provide income, long-term investors who spend a little time can significantly increase their total return by capturing higher yields and benefit from potential upsides of investments. While most dividend and interest income is taxable, if the actual yield is high enough to outweigh the tax costs, or the upside potential for growth or conversion is foreseeable, these strategies are worth a look. Unlike the buy-and-hold ladder-type strategies utilizing low-risk bonds, these strategies require an active interest and effort, but the long-term benefits are worth the work.

Source: Globe and Mail

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