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The best time to buy an annuity is always last year.

Annuity payouts are tied to interest rates, which have mostly fallen in recent decades. It’s an omnipresent hazard for people considering annuities to provide some of their retirement income – they can almost always look back and say they would have been better off buying a year ago.

But annuities have actually held up pretty well in this low-rate world we live in, at least when you compare them with guaranteed investment certificates.

Ivon Hughes, an annuity dealer with the Montreal-based Hughes Trustco Group, recently sent me a table of annuity quotes for January 2021, along with historical quotes going back to 2011. A 65-year-old woman looking for a $100,000 registered annuity would have been able to lock in payments as high as $553.87 in early 2011, according to the list of quotes from 10 insurance companies. Flash ahead to January 2021 and the best comparable quote is 21 per cent less at $436.73.

Now for a comparison with guaranteed investment certificates, courtesy of the historical interest charts provided by the online bank Tangerine. They show that a five-year GIC was available in January 2011 for 3 per cent, which compares with Tangerine’s mid-January 2021 rate of 1.1 per cent for five years.

Five-year GIC returns have been slashed by more than half, while annuity payouts have declined by roughly one-fifth. Annuities look even better when you look at what’s happened with bond yields. The Bank of Canada website shows five-year Government of Canada bonds had a yield around 2.6 per cent in mid-January 2011, compared with about 0.4 per cent now.

Thanks in part to competition between GIC issuers to attract money, rates on these safe investments have not fallen nearly as much as government bond yields. Annuities have held up better, a reflection of the fact that their returns are based on factors beyond rates. Part of annuity returns come from mortality credits, a term that refers to the component of annuity payments that come from people who bought annuities and died before they used up what they paid in.

As usual, one year ago was a better time to buy annuities than right now. The Hughes Trustco quotes show a woman aged 65 could have received as much as $457.87 in early 2020, about $21 more per month than is currently available.

But let’s give annuities their due – payouts have held up surprisingly well despite falling interest rates.

Click here for annuity and GIC rates.

-- Rob Carrick, personal finance columnist

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Stocks to ponder

AutoCanada Inc. (ACQ-T) The Edmonton-based company’s stock is up about 20 per cent so far this year and has soared by about 160 per cent over the past year. Analysts say shares of the company, which sells new and used vehicles and parts and repair services across North America, are benefitting from consumer demand as well as operational improvements and a move into digital services. Brenda Bouw tells us why analysts are still bullish on the stock.

The Rundown

Three ESG stock picks from veteran money manager Francois Bourdon

It took a global pandemic and a stock market rout (and subsequent rally) for many investors to finally turn their attention to the benefits of responsible investing – and François Bourdon believes it’s a trend that isn’t going away. Mr. Bourdon is the former global chief investment officer at Fiera Capital Corp., and now managing partner at ESG research firm Sustainable Market Strategies. The Montreal-based company in the process of registering as a portfolio management company that will offer a long-short strategy for ESG investing. His firm is expected to launch its fund by the summer with a focus on a dozen ESG themes. Brenda Bouw tells us about three of his picks from the company’s current model portfolio.

Short sales on the TSX: What bearish investors are betting against

Larry MacDonald reviews the activist short sales of Canadian stocks in 2020. And with the view of identifying the names short sellers have the highest conviction in going forward, looks at the most expensive stocks to borrow right now.

The top five Canadian equity analysts of 2020 – and their most profitable picks

2020 was a wild ride for stock markets. TipRanks, a financial technology company, tracked the performance of financial analysts who published recommendations throughout the year. Here’s the breakdown of the analysts with the highest success rates - and the stock picks that helped them to achieve that.

Earnings season to test surge in U.S. regional bank stocks

Regional banks in the S&P 500 have surged 11 per cent since the beginning of the year, beating out the gains in larger, more diversified banks by about a percentage point over the same period. As David Randall of Reuters reports, that winning streak is about to be tested.

Wall Street worries about the cost of Biden stimulus plan

A proposed $1.9 trillion coronavirus relief stimulus package from President-elect Joe Biden may prove a double-edged sword for investors, sustaining optimism for further economic revival while raising worries over how the United States will pay for it all. David Randall of Reuters reports.

China’s commodity imports saved 2020; this year may be different

There is both a history lesson and a warning in the latest Chinese data on imports of major commodities. The history part is that China bought record volumes of crude oil, copper, iron ore and coal in 2020, showing just how vital the world’s biggest buyer of natural resources was in keeping the commodity market buoyant in a year when the global coronavirus pandemic threatened to crush demand. The warning part is that the trade data for the month of December, released on Thursday, shows that China’s massive buying spree appears to be ending, and import demand may be returning to what could be viewed as more “normal” levels. Clyde Russell of Reuters has this analysis.

Others (for subscribers)

The week’s most oversold and overbought stocks on the TSX

Friday’s analyst upgrades and downgrades

Thursday’s analyst upgrades and downgrades

Number Cruncher: Ten U.S. small caps rising to the fore in trending markets

Number Cruncher: These S&P 500 stocks see their sales grow despite difficult times

Ask Globe Investor

Question: I am a lifelong dividend investor, but 2020 was the third year in a row I have badly underperformed the Canadian and U.S. indexes. Now, I am questioning my strategy. Specifically, three stocks – Inter Pipeline Ltd. (IPL), Wells Fargo & Co. (WFC) and Altria Group Inc. (MO) – have left me thinking I should be simply buying index ETFs rather than trying to hold a basket of dividend payers. How do you know when to throw in the towel?

Answer: If it makes you feel any better, my model Yield Hog Dividend Growth Portfolio also had a rough year. It delivered a total return of negative 0.5 per cent in 2020, trailing the S&P/TSX Composite Index’s total return of 5.6 per cent. The good news is that, even after a lousy 2020, the model portfolio’s total return of 25.6 per cent since inception on Oct. 1, 2017, still leads the S&P/TSX’s total return of 23.5 per cent over the same period. (Total return figures include dividends.)

But let’s be honest: Those returns pale next to the scorching performance of the S&P 500. Even amid a global pandemic, the S&P 500 posted a total return of 18.4 per cent in 2020. And the S&P 500 has soared 58.7 per cent since my model portfolio was launched in 2017.

So is it time to throw in the towel on dividend investing? I don’t think so. Unfortunately, you stepped on a few land mines in 2020: Inter Pipeline and Wells Fargo both cut their dividends, and Altria Group’s share price tanked even though the company raised its payout. But plenty of U.S. and Canadian dividend growth stocks put up returns well into the double digits. Examples include Microsoft Corp. (MSFT), Apple Inc. (AAPL), Brookfield Infrastructure Corp. (BIPC), Brookfield Renewable Corp. (BEPC) and Innergex Renewable Energy Inc. (INE). (Full disclosure: I own BIPC, BEPC and INE personally.)

Rather than give up on dividend investing, consider adopting a hybrid strategy. You could, for example, hold a core group of dividend stocks including Canadian banks, utilities, power producers and telecoms. These stocks are on the conservative end of the risk spectrum, pay above-average yields and raise their dividends regularly, providing you with a growing income stream.

To add some diversification, consider investing in one or more index ETFs. Information technology stocks have been a huge driver of the S&P 500′s performance, but many of these stocks pay no dividends, which is one reason dividend strategies have lagged in recent years. By investing in an ETF that tracks the S&P 500 – which has 28-per-cent weighting in tech stocks – you’ll get exposure to this important sector, plus hundreds of other companies.

In my personal portfolio, I own a mix of individual dividend growth stocks and Canadian and U.S. index ETFs, and I’ve been pleased with the results. Of course, if you don’t want to own individual stocks, there’s no reason you can’t go with an all-ETF portfolio.

--John Heinzl

What’s up in the days ahead

Rob Carrick will tell us why online brokers are at risk of losing their most valuable clients as a result of massive delays in handling the high volume of phone calls.

No. 46 enters the White House: World market themes for the week ahead

Click here to see the Globe Investor earnings and economic news calendar.

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Compiled by Globe Investor Staff