With the Bank of Canada (BoC) cutting rates by 25 basis points, the hunt for yield could become tougher, at least if you’re looking for risk-free or low-risk yields in the bond market. Indeed, with GIC (Guaranteed Investment Certificate) and savings account yields standing to fall further, passive-income investors may wish to return to the equity market for better yields (and dividend growth).
Also, the REIT (real estate investment trust) scene also looks like a great way to score much higher yields without having to run the risk of a substantial dividend or distribution cut, given many hefty REIT yields are higher by design. And in this still somewhat high-rate environment, REIT yields may still be more generous than what you’re used to.
Either way, look for the Bank of Canada to keep lowering rates, which may be a huge boon to the REITs, given they’ll have more flexibility to pursue growth projects while rewarding shareholders with more distribution hikes. In any case, the latest dip in the REIT scene seems more like an opportunity to get a bit more yield for less than anything else, especially if more rate cuts are coming our way in response to a potential tariff-fuelled economic recession.
Of course, the Bank of Canada must also keep inflation under control if it’s to really take rates markedly lower. In any case, income investors have ample options as the Bank of Canada looks to have a bit more room than the U.S. Federal Reserve (the Fed) as tariffs take a big bite out of the Canadian economy.
The big question on many Canadian income investors’ minds is whether their next big income buy should come from the REIT space or somewhere else, perhaps the telecom scene, while it’s in a weak spot. Though I’m not against picking up shares from both corners of the market, I think that those who aren’t fans of volatility should tread cautiously into the telecom scene as many of the deep-value names struggle to bottom out after a painful multi-year crash.
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BCE
For instance, BCE (TSX: BCE) stock now goes for $33 and change, down over 54% from its early 2022 peak. With new multi-year depths in sight, I do see a strong case for buying the telecom titan while it’s still going for a historic discount. Sure, there is a lack of catalysts and many issues to overcome in 2025.
However, with an AI-powered network operation recently launched and other partnerships that could bolster the network, I do see a path out of the multi-year rut. Investors will just need to be patient and brace for a dividend cut, something which seems to be an expectation at this point. With the firm coming off massive cuts to its workforce, perhaps the company could have tools to dampen the turbulence ahead for Canada’s wireless scene.
REITs
If the safety of yield (as opposed to capital gains potential) is what you prioritize, BMO Equal Weigh REITs Index ETF (TSX: ZRE) could be a better bet while it’s yielding north of 5.1%. Indeed, shares are in a tough spot, even after recent BoC rate cuts. Down around 27% from highs, I do see the REIT exchange-traded fund as a great value for investors who aren’t huge fans of the telecom scene right here. Personally, I’d go for the ZRE for stabler yield, but if you’re a young investor seeking bounce-back potential, BCE stock looks intriguing.
