Dividend Stocks The Best Place For Investors

Dividend stocks drove the S&P 500 and TSX Composite Indexes to their best September performances in 71 and 14 years, respectively, and these stocks will likely continue to be the best place for investors for some time, finds a new report from CIBC World Markets Inc. The report notes that a low interest rate environment will be with us for the foreseeable future hurting returns on the short-term bond market. It also finds that while longer bonds benefited from the capital gains associated with the recent rally, the party may be over soon since prices are being pushed to artificial highs by expectations the U.S. Federal Reserve Board will again go shopping for bonds.

"That leaves equities as the refuge from the low growth, low return environment," says Avery Shenfeld, chief economist at CIBC. "Reliable dividend paying equities stand out in a non-recessionary, but slow growth world. Cashing dividend cheques, as opposed to paycheques, or bond coupons, may be the best way to make some money when others aren't." Historically, dividend stocks perform well when the economy is running as it is now - growth at less than two per cent and inflationary risks tilted to the downside. In both Canada and the U.S., these stocks have fared better over the medium term than those with low or unstable payout histories, and the gap has been widest in periods of subdued economic performance.

Source: CNW

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