In uncertain times, dividend paying investments may certainly be a good idea

That’s why, given the current backdrop, dividend paying investments may make a lot of sense for investors looking to maximize their investment income. Dividend paying equities and funds tend to do well in periods of uncertainty, such as the one we’re in now. As an investor, you get paid to wait and have certainty of return in terms of yield. 

Dividend paying investments also tend to provide better downside protection, because dividend payers have proven business models, generate good free cash flow, have more capital discipline and less operating variability. In short, they’re generally higher-quality businesses. And with dividend paying investments, you don’t need to sacrifice upside in the event that the market recovers. 

At present, underlying fundamentals are solid. For the most part, the consumer is healthy and businesses are growing and investing, though both are beginning to pull back a little in the face of tariff uncertainty. So, again, with dividend paying investments, you’re getting paid while waiting out the uncertainty, protecting your downside, and if you stay invested will likely participate in growth when the market returns. 

If we look back at the last few years of asset class returns, 2022 was a difficult market for equities. Cash was the top performing asset class, but Canadian dividends were a close second with flat returns. The following year, markets rebounded and U.S. equities were the top performing asset class. Canadian dividends delivered a respectable 10% total return. Similarly, in 2024, Canadian dividends delivered a 20% total return, keeping pace with global equities. In other words, when times are unpredictable, the predictability of dividends are not only comforting, they can also be rewarding.

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