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Cash has long been laughed at for its pathetic returns, but at last it may be on the verge of winning some respect among investors.

Yields on short-term fixed-income investments, which resemble cash because they lock up your money for no more than a few months, are on the rise and challenging aspects of the equity market.

The yield on the three-month U.S. Treasury bill is now about 1.9 per cent, after rising above the dividend yield on the S&P 500 late last week for the first time in about a decade.

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Canadian government bonds are also yielding more, and savers can get guaranteed returns of nearly 3 per cent from certain financial institutions to invest in their guaranteed investment certificates (GICs).

This is a remarkable shift: Suddenly, risk-free cash is delivering returns that can compete with dividends, offering yield-seeking investors a compelling alternative. And the competition arrives at a time when steady dividend-payers, such as utilities, telecom stocks and real estate investment trusts, are in the dumps.

Is it time to look at cash as an attractive investment?

Its new look follows tighter monetary policy from central banks. The U.S. Federal Reserve has raised its key rate six times since 2015 and is on track for additional rate hikes this year if low unemployment, wage growth and other inflationary pressures persist.

Similarly, the Bank of Canada has raised its key rate three times since last summer, and financial markets are expecting a fourth hike later this year.

Fixed income has followed central banks. The 1.9-per-cent yield on the three-month U.S. T-bill is up from a smidgen above zero – yes, zero – as recently as 2015. That’s when the acronym TINA (there is no alternative) drove investors to the stock market for all their needs.

The Canadian three-month T-bill yields less than 1.3 per cent, which is still well below the dividend yield of 2.8 per cent for the S&P/TSX Composite Index. But the yield on the T-bill has risen significantly from a low of about 0.5 per cent just last year.

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Yields on some GICs have been more stubborn. The Big Six banks are selling one-year GICs – close enough to cash – with yields of little more than 1 per cent, on average, according to Ratehub.ca. That has changed little even as interest rates have gone up.

But smaller financial institutions are beckoning with far more attractive rates. For example, Oaken Financial is now offering a yield of 2.8 per cent on a one-year GIC. EQ Bank isn’t far behind with a yield of 2.76 per cent.

In other words, you can easily find near-cash investments that rival the payouts from equity dividends. And while the returns on GICs and T-bills aren’t gargantuan, the payouts are fixed and your capital is preserved – appealing features given the wild ride that dividend stocks have been on recently.

The S&P 500 has risen 2 per cent so far this year, but interest rate-sensitive utilities and REITs are down about 7 per cent each, and telecom stocks are down more than 12 per cent.

The mayhem in Canada looks similar. While the S&P/TSX Composite is relatively flat this year, utilities have tumbled 11 per cent and telecom stocks are down 7 per cent.

Yes, as stock prices fall, dividend yields rise (assuming companies do not cut their distributions). In Canada, telecommunications giant BCE Inc. and power generator Emera Inc. both have attractive yields of 5.6 per cent − but their total returns this year, including dividends, are still well in the red.

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Even exchange-traded funds that track so-called aristocrat stocks, which have a lengthy history of raising their dividends yearly, are struggling. The iShares S&P/TSX Canadian Dividend Aristocrats Index ETF is down 5.5 per cent this year. The SPDR S&P Dividend ETF is down 6.4 per cent since late January.

Say what you want about cash, but it’s beating cash-paying stocks.

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