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A diversified portfolio, with a mix of blue-chip dividend stocks and smaller-cap growth stocks, can help mitigate risk as the markets get rocky.
It’s been a good decade for growth stocks, especially in the tech sector. But as global stock market volatility sets in and some indexes begin trending downward, many investors are looking for more stability.
As a result, Ian Calvert, vice-president and principal at HighView Financial Group, says he’s beginning to see more interest in dividend stocks.
Investors are being drawn to stable and mature picks, and they love that you can earn a return in two ways: through the appreciation of shares themselves, but also through dividend payouts, especially when dividends are growing.
That doesn’t mean you should dump all your growth stocks, Calvert says. He recommends a diversified portfolio, with a mix of blue-chip dividend stocks, smaller-cap growth stocks to mitigate risk, and other kinds of investments as well.
“Having exposure to other fixed-income investments, commodities or alternative investments that aren’t publicly traded can be a real strength and stabilizer,” he says.
Canadian dividend stocks are a particularly tax-efficient source of income, because their dividends are taxed at a lower rate than other types of income.
Specifically, Calvert recommends the Big Five banks, telecom companies such as Bell Canada and Rogers Communications, energy and energy infrastructure companies such as Enbridge, and railroad companies such as Canadian National Railway and Canadian Pacific.
Financial services companies are consistently popular, he says, as they make up the lion’s share of the Canadian dividend market and have a long history of raising their dividends.
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