If you’ve got some GICs (Guaranteed Investment Certificates) coming due and are on the fence about renewing for another term, whether it be for another year or a bit longer, you’re definitely not alone. Undoubtedly, the bank GIC rates seem to keep getting worse over time, thanks in part to falling rates.
And while a sub-3% GIC on a 12–14 month term might still seem satisfactory to some, given inflation has fallen quite a bit in recent quarters, I do think that there are far better deals elsewhere for those willing to take on some risk. Of course, higher risk tends to accompany higher rewards.
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GIC rates have fallen by quite a bit in the past year
While no such investments will be as safe as a GIC (it really doesn’t get much safer than “guaranteed!”), I do think diversifying into a broad range of lower-beta assets could make sense, especially if one is looking to get a more satisfactory real return, one that’s probably far greater than 1%.
The days of 5%-rate GICs were nice while they lasted, but those days are long gone, and as central banks consider reducing rates further from here, there’s the potential for GIC rates to stay lower for a whole lot longer.
In any case, let’s get into some dividend ideas, which, I think, offer a better risk/reward proposition, provided one can handle volatility as they forego the certainty that only GICs can provide.
CT REIT and Canadian Tire shares have impressive dividends
CT REIT (TSX: CRT.UN) isn’t a dividend stock, but it is a high-quality REIT with a yield of 5.8%. With a lower 0.84 beta and one of the more secure cash flow streams out there, I like the name as an income booster, especially if you’re not interested in sticking with GICs as they roll into a low-rate world. Now, CRT.UN shares are somewhat less choppy than the broad market, but that does not mean you won’t have to deal with wild swings.
Shares have fallen by more than 5% a number of times in the past year. And there’s bound to be choppiness in both directions. If you’re willing to tune out and collect the distribution, though, I think there’s a strong argument for adding to shares at around $16 and change. The REIT, which houses Canadian Tire (TSX: CTC.A) locations across the country, stands out as one of the better ways to get a safe and sound monthly distribution payment.
The REIT and the retailer have nice yields
Of course, you could invest in Canadian Tire shares themselves, which yield a generous 4.1% with more room for upside, but if you’re looking for added stability rather than looking to play the strength of the Canadian consumer, the REIT behind the retailer might be a better bet.
If you’re willing to settle for less yield, I do think Canadian Tire is a standout bargain while it’s going for 12.2 times trailing price-to-earnings (P/E), especially if the resilient consumer looks to ramp up on discretionary spending.
Additionally, Canadian Tire’s latest quarter, I think, could be the precursor to even more strength as things look up for sales and margins. If you want relative safety and more yield over capital gains potential, CRT.UN seems like the better bet.
