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Jonathan Hayward/The Canadian Press

You want higher yields on your investments?

In the world of dividend stocks, you have them. Dividend stalwarts in variety of sectors have fallen in price this year, and that means rising yields. There's a growing selection of individual dividend stocks with yields of 4 per cent or more, and several dividend exchange-traded funds as well.

Anticipation of higher U.S. interest rates has weighed on dividend stocks, and we may well see further declines. But if you're desperate for higher yields than you can get from bonds and guaranteed investment certificates, dividend stocks and ETFs are starting to look interesting. Now might be a good time for income-focused investors to start nibbling.

Let's get the psychology for this type investing straight. You have to be comfortable with the risk of price declines in whatever you buy. You'll accept this risk in return for yields that well surpass the 0.95-per-cent yield on five-year Government of Canada bonds and the 2.5-per-cent yields that alternative banks, trust companies and credit unions are offering on five-year GICs. If your dividend holdings fall in price, you won't sell. In fact, you might buy more to capture higher yields.

I summarized the selection of Canadian dividend ETFs listed on the Toronto Stock Exchange as part of my recent ETF Buyers' Guide series. A quick check on Globeinvestor.com shows that at least four of them had yields in excess of 4 per cent as of the beginning of the month. Leading the group on yield was the iShares S&P/TSX Composite High Dividend ETF (XEI), at 4.6 per cent. Next came the BMO Canadian Dividend ETF (ZDV) at 4.3 per cent. Both have about 60 per cent of their assets in financials and energy, two of the weaker performing sectors on the TSX this year. Therein lies a lesson – high yields come hand in hand with out of favour stocks.

Investors have been throwing money at dividend stocks since 2009 and reaping huge rewards. The time for indiscriminate dividend investing may now be over, but income seekers should stick around because yields are starting to get interesting.