In praise of dividend-rich stocks

GCIC's Jason Gibbs challenges notion of price bubble.

Sonita Horvitch 29 May, 2013 | 6:00PM

Jason Gibbs, vice-president and portfolio manager at GCIC Ltd., says that Canadian and U.S. real-estate companies, telecommunications-services providers, pipelines and railways all continue to represent ideal holdings in an equity portfolio seeking to generate both a high level of dividend income and preserve capital.

Gibbs challenges those who contend that some of the more defensive dividend-paying stocks have risen to bubble levels. For a start, he says, most of these stocks have dividend yields comfortably above the risk-free [government] rate of interest both in Canada and the United States.

Then, he says, there is "not an avalanche of new issues, which typifies the last stages of a bubble, as was evidenced in the tech fever of the late '90s." In the final stages of these bubbles, "lesser quality companies jump on the bandwagon." Also, North American demographics are such that "there is a growing investor preference for dividend-paying stocks."

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Sonita Horvitch

Sonita Horvitch