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GIC rates are so bad right now that one big bank is offering a “special” rate of 0.2 per cent for one year.

That’s double – double! – the posted rate of 0.1 per cent. What’s a yield-hungry conservative investor to do? Maybe consider bank stocks.

Okay, this is risky stuff. I recall bank stocks losing roughly 40 per cent to 50 per cent their value in one particularly nasty stretch during the global financial crisis. Bank stocks fell by roughly one-third as a group when the pandemic took hold in late winter and haven’t yet recovered to the same extent as the broader market.

This is precisely the kind of experience that drives people out of stocks and into guaranteed investment certificates. GICs are a lead-lined bunker that protects you against stock market radioactivity. That’s why they exist.

But what if 0.2 per cent won’t cut it? You could explore the many alternative GIC issuers offering 1.5 per cent to 1.8 per cent, all of them with deposit insurance from Canada Deposit Insurance Corp. or provincial credit union plans. For those who insist on the stability of a big bank, there’s one more option. Buy the bank’s shares and get your investment income through dividends rather than interest.

GICs won’t fall in value, while bank stocks can and most certainly will fall if loan defaults surge as a result of the pandemic’s effect on the economy. Mortgage and loan payment deferrals offered early in the pandemic are being wound up and some clients likely won’t be able to resume their mortgage payments.

Banks compensate you for the risk of falling share prices with a hefty dividend. The yield on Big Six bank stocks as of midweek averaged 5 per cent, with Bank of Nova Scotia leading at 6.4 per cent and National Bank of Canada trailing at just less than 4 per cent. These yields look even better than a GIC in a non-registered account, owing to the dividend tax credit.

If you need to keep your principal safe in the near to medium term, then GICs are the vehicle for you. Bank stocks can’t be trusted for this purpose. But if you’re all about investment income and need a decent yield from a security issued by a blue-chip entity, bank stocks can do the job.

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