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With stocks falling, it’s a great time to be an income-focused dividend investor.

As stocks dropped yet again this week, I took a look at dividend yields for the big blue chips in the S&P/TSX 60 index. Yields of 6 per cent and higher were available from eight companies, each with a good record of dividend growth over the past five years. Yet another company had a yield of 5.9 per cent.

Once again, we are reminded of a positive side of falling stocks. As share prices fall, dividend yields climb to levels that beat even today’s elevated returns from guaranteed investment certificates and bonds. The after-tax return is even better in a non-registered account, where the dividend tax credit applies.

Stock market volatility is a given these days, but the ups and downs this fall seem to have reached a new level. Stock market rallies can push yields down below arbitrary thresholds like 6 per cent, and lately we’ve seen uptrends quickly retreat. Track the dividend stocks you’re following with a Globe Investor Watchlist, then use the dividend view to monitor yield, one- and five-year returns and five-year dividend growth.

My TSX 60 watchlist ranked Enbridge Inc. (ENB-T) high on the yield list at 6.9 per cent, a number that reflects investor concerns about the company, including the sustainability of its dividend.

Also at 6.9 per cent was Algonquin Power and Utilities Corp. (AQN-T). AQN shares have fallen hard lately for reasons that include rising interest rates. Higher rates increase the cost of servicing the company’s debt and also weigh on the price of utility stocks in general.

TC Energy Corp. (TRP-T) was next, with a yield of 6.6 per cent, followed by BCE Inc. (BCE-T) at 6.5 per cent. A recent Globe and Mail article pointed out that a yield of 6 per cent for BCE shares has in the past been a buy signal. Alongside BCE at 6.5 per cent was Power Corp. of Canada (POW-T).

Bank stocks with 6-per-cent yields are a rarity, but Bank of Nova Scotia (BNS-T) was perched at 6.4 per cent as of earlier this week. An alternative choice among financials was Manulife Financial Corp. (MFC-T), at 6.2 per cent.

Rounding out the eight stocks at 6 per cent or more was Pembina Pipeline Corp. (PPL-T), at 6.2 per cent. Just a hair below that yield threshold was Canadian Imperial Bank of Commerce (CM-T).

Yields of 5 to 6 per cent and more for blue chips are a sign of investor unease, so none of these stocks are anything close to risk-free. The blue chips that have cut dividends in past decades include TC Energy, Manulife and Telus Corp. (T-T), which this week had a yield of 4.9 per cent.

Still, all the stocks mentioned above have increased their dividends over the past five years by annualized rates that range from 10 per cent for AQN to 4.2 per cent for CM. If you’re going to buy stocks on sale, a record of dividend growth is a good place to start your research.

Disclosure note: I own shares of AQN, ENB, BCE and TRP.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 19/04/24 4:00pm EDT.

SymbolName% changeLast
ENB-T
Enbridge Inc
+2.79%47.97
AQN-T
Algonquin Power and Utilities Corp
+1.49%8.17
TRP-T
TC Energy Corp
+1.05%49.05
BCE-T
BCE Inc
+1.04%44.8
POW-T
Power Corp of Canada Sv
+1.04%36.84
BNS-T
Bank of Nova Scotia
+0.22%64.28
CM-T
Canadian Imperial Bank of Commerce
+0.63%65.43
PPL-T
Pembina Pipeline Corp
+1.65%47.98
T-T
Telus Corp
+0.64%21.87

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