Skip to main content

You’re not alone if the stock market ups and downs of 2020 have left you feeling mostly down.

Stocks have roared back from the depths of March, but some investors haven’t yet bounced back from the trauma of the market decline. Their feelings of uncertainty were captured in a recent e-mail from a reader who is retiring in her mid-60s along with her partner. They’ve sold some properties and have a high six-figure amount of money to invest.

“Our goal was to generate passive dividend income and enjoy our life,” she wrote. “Is this still wise? We are fearful of losing everything we’ve worked so hard for.”

Story continues below advertisement

The wisdom of this couple relying on a huge investment in dividend stocks to generate retirement income is best assessed by a financial planner who can examine their other sources of income, their spending needs, their resources to weather financial emergencies and their tax situation. But, in general, dividend investing is as wise as ever if you go into it realistically. A few points to guide your thinking:

DIVIDEND STOCKS CAN BE VOLATILE

The price of dividend-paying stocks can bounce around a lot, as we’ve seen this year. Bank stocks are well off their 52-week highs, for example. Generating passive dividend income means a focus on cash dividends paid quarterly and not on share price. But some investors are going to see big share price declines in disastrous terms, even as their dividends keep flowing. Hence this reader’s comment about losing everything she and her partner worked for.

DIVIDENDS CAN BE CUT OR SUSPENDED

Suncor Energy Inc., Reitmans (Canada) Ltd., Mullen Group Ltd., Inter Pipeline Ltd., Gildan Activewear Inc. and CAE Inc. are but a few examples of companies that have cut or suspended dividends since the start of the pandemic. If you’re relying on dividend income, you’ll want to diversify your holdings and go lightly, if at all, on cyclical stocks that do best when the economy is strong. A focus on dividend growth stocks also makes sense. A company has to be well run to build a history of steady dividend increases. Pay close attention to how a company managed dividends during and after the 2008-09 recession as well as in 2020.

DIVIDEND-PAYING BLUE CHIP STOCKS WILL SURVIVE THE PANDEMIC

Countries around the world proved during the spring and summer that they could contain COVID-19 well enough for the economy to stabilize. We will get the pandemic second wave under control as well.

Story continues below advertisement

DIVIDEND STOCKS OFFER COMPENSATION FOR ALL THE RISKS MENTIONED HERE

The yield on the S&P/TSX Canadian Dividend Aristocrats Index is around 4.5 per cent, while a five-year Government of Canada bond yield has been stuck around 0.4 per cent since May.

The wisdom of dividend investing is as compelling as it ever was, but not everyone is cut out to live off income from a stock portfolio subject to violent market moves.

-- Rob Carrick, personal finance columnist

This is the Globe Investor newsletter, published three times each week. If someone has forwarded this e-mail newsletter to you or you’re reading this on the web, you can sign up for the newsletter and others on our newsletter signup page.

Stocks to ponder

Story continues below advertisement

CloudMD Software & Services Inc. (DOC-X) Shares of this telehealth company are on a tear amid the pandemic-driven focus on virtual health care and the company’s aggressive acquisition strategy — and analysts see more growth ahead. The Victoria-based company, which provides services to 376 clinics, more than 3,000 licensed practitioners and nearly 3 million “patient charts” across its servers, is up more than 380 per cent over the past year. Brenda Bouw reports. (for subscribers)

The Rundown

U.S. bank stocks are fine, if you are rich in patience

The U.S. bank sector has been pummeled this year but investors hunting for bargains there may need deep reserves of patience as banks are particularly sensitive to low interest rates, the uneven economic recovery and the muddy stimulus outlook. Sinead Carew of Reuters reports. (for everyone)

Investors' bets on a Democratic sweep grow after Biden debate performance

The debate between Democratic presidential candidate Joe Biden and President Donald Trump, marred by frequent interruptions and name-calling, did little to enlighten the electorate. But it was enough to turn the consensus on Wall Street toward Biden. The fractious Sept. 29 faceoff led to a jump in Biden’s lead over President Donald Trump in several national polls, fuelling moves in a broad range of assets sensitive to a decisive Democratic victory, from clean energy companies and U.S. government bonds to foreign exchange derivatives that hedge against market volatility. And a second debate - if it happens - may not matter all that much to Biden. April Joyner and David Randall of Reuters reports. (for everyone)

Story continues below advertisement

Also see: Wait, Wall Street is pro-Biden now?

Investors eye discounted U.S. health-care sector as Biden’s lead in polls grows

Investors are looking for bargains among healthcare stocks, even as prospect of a Democratic “Blue Sweep” in next month’s elections threatens more volatility for a sector already trading near a historical discount to the broader market. Lewis Krauskopf of Reuters reports. (for everyone)

Others (for subscribers)

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

Friday’s analyst upgrades and downgrades

Story continues below advertisement

Thursday’s analyst upgrades and downgrades

Friday’s Insider Report: Vice-Chair invests over US$1.6-million in this dividend stock

Thursday’s Insider Report: Company leaders are selling these three high-flying stocks

Number Cruncher: Twelve U.S. dividend growth stocks that provide stable income

Number Cruncher: In a year of drawdowns, this equity fund category has shined

Others (for everyone)

Story continues below advertisement

Icahn sees energy sector rebound but urges patience

Globe Advisor

Six stocks that could become takeover targets

Are you a financial advisor? Register for Globe Advisor (www.globeadvisor.com) for free daily and weekly newsletters, in-depth industry coverage and analysis, and access to ProStation - a powerful tool to help you manage your clients’’ portfolios.

What’s up in the days ahead

Interested in gaining more exposure to the TSX utility sector through an exchange-traded fund? John Heinzl looks at which ETF in the marketplace may be the best choice.

Banks, bottom lines, Brexit: World market themes for the week ahead

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

More Globe Investor coverage

For more Globe Investor stories, follow us on Twitter @globeinvestor

You may also be interested in our Market Update or Carrick on Money newsletters. Explore them on our newsletter signup page.

Compiled by Globe Investor Staff

Follow related topics

Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies