GICs Are Done: This Dividend Stock Is a Much Better Income Option

As GIC yields sink, Richards Packaging offers higher income and potential upside, without abandoning the safety investors want.

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Key Points
  • Falling rates make GICs less attractive
  • Richards Packaging earns steady cash flow from essential industries
  • Unlike GICs, RPI.UN also offers potential unit price gains, giving long-term investors income now and upside over time.

Guaranteed Investment Certificates (GIC) are awesome when the timing is right. They were fantastic during the high-interest environment because GICs paid Canadians something meaningful for simply parking cash. Many offered over 5% returns with zero effort and zero risk at a time when the stock market felt shaky. But now that rates have fallen and are expected to keep falling, those juicy yields have all but disappeared.

This leaves investors locked into much lower returns that can barely keep up with inflation. Meanwhile, high-quality dividend stocks and exchange-traded funds (ETF) are offering better yields and long-term growth potential. Therefore, GICs have shifted from “easy win” to “missed opportunity” for anyone hoping to grow wealth rather than just preserve it.

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When GICs work, and don’t

Over the last few years, GICs were a no-brainer. Interest rates were at their highest levels in over a decade. Investors could lock in 4% to 5% with zero volatility, zero decision-making, and full principal protection. All at a time when inflation, market downturns, and economic uncertainty made stocks feel risky. But as soon as rate cuts began, the window closed. GIC yields fell sharply, and suddenly investors were tying up money for far less reward. Today’s lower GIC rates barely preserve buying power, let alone grow wealth.

That’s where dividend stocks start to shine. In a lower-rate environment, companies with healthy balance sheets and consistent cash flows can often pay dividends far above what any GIC offers. Unlike GICs, dividends also come with the potential for capital appreciation. Therefore, your money isn’t just sitting still; it can grow with the company. Many TSX dividend stocks now yield 5%, 6%, 7% or more. And unlike GICs, those payouts can rise over time. The combination of ongoing income plus long-term upside makes dividend stocks a compelling upgrade from today’s shrinking GIC returns, especially for long-term investors looking to build real wealth rather than simply maintain it.

Consider RPI

Richards Packaging Income Fund (TSX:RPI.UN) is one of the quietest but most resilient income-paying businesses on the TSX. It supplies packaging for healthcare, food, cosmetics, and industrial clients across North America. Because its customers operate in essential, non-cyclical industries, demand for its products remains remarkably steady even when the economy wobbles. The stability has allowed Richards Packaging to maintain a reputation as a dependable cash-flow generator. This makes it a favourite among investors who want income without taking on excessive risk.

Recent results show that Richards Packaging continues to perform reliably. Revenue remained stable year over year as its healthcare and food packaging segments offset softness in discretionary consumer goods. Cash flow held up well, driven by tight cost controls and a disciplined operating model. While management acknowledged that growth has moderated since the pandemic-era surge in packaging demand, profitability remains healthy, leverage is manageable, and the business continues to produce predictable distributable cash.

Foolish takeaway

RPI.UN pays a higher yield than most current GIC rates, and the underlying business is far more dynamic. Its steady cash flow supports ongoing distributions that can remain stable even in slower markets. Meanwhile, the unit price has the potential to appreciate over time, a benefit GICs simply cannot offer. And for now, here’s what just $7,000 could earn investors.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDTOTAL ANNUAL PAYOUTFREQUENCYTOTAL INVESTMENT
RPI.UN$28.10249$1.32$328.68Monthly$6,996.90

For income-focused investors, Richards Packaging combines reliability, defensiveness, and long-term upside, making it a compelling choice for replacing lower-yield GICs in a TFSA or RRSP while still keeping risk at a moderate level.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Richards Packaging Income Fund. The Motley Fool has a disclosure policy.

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