Your GIC Is Maturing: Here’s Why Keeping All the Cash Could Cost More

A maturing GIC is safe, but rolling it all over could quietly sacrifice long-term growth as rates fall.

| More on:
Key Points
  • Use GICs for money you’ll need soon, but invest long-term cash so inflation doesn’t win.
  • Emera is a regulated utility with predictable demand and a plan to grow earnings about 5% to 7% yearly.
  • A $10,000 Emera buy could pay about $422 annually in dividends, but the stock can drop and debt adds risk.

A maturing guaranteed investment certificate (GIC) creates the pleasant problem of having cash and the less pleasant problem of deciding what to do with it.

Renewing the entire amount can feel like the sensible choice. The principal remains protected, the return is known in advance, and nobody needs to watch a stock chart behave like it has consumed three espressos.

Yet safety has a cost. Current GIC rates are considerably lower than the returns many investors locked in when interest rates were near their peak. One major Canadian bank recently offered approximately 2.7% on a one-year non-redeemable GIC. That still provides a guaranteed return, but taxes and inflation can consume much of it when the investment is held outside a registered account.

The bigger cost may be the growth surrendered by keeping long-term money entirely in guaranteed investments.

diversification and asset allocation are crucial investing concepts

Source: Getty Images

Give each dollar a deadline

Money needed within the next few years generally doesn’t belong in stocks. A GIC remains useful for an emergency reserve, an upcoming renovation, tuition, or the next several years of retirement withdrawals. Money that won’t be required for a decade has a different job. It needs enough growth to protect future purchasing power.

Consider $10,000 compounding for 10 years. At an illustrative 2.7% annual return, it would grow to approximately $13,053. At 7%, it would reach roughly $19,672. Actual stock returns won’t arrive smoothly or predictably, but the $6,619 difference shows what too much certainty could cost.

I wouldn’t move every maturing dollar into the market. I would divide it according to when the money will be needed, then consider investing the long-term portion in durable Canadian dividend stocks. One company that could help bridge the gap between dependable income and long-term growth is Emera (TSX: EMA).

Productive income source

Emera stock owns regulated electricity and natural-gas utilities serving approximately 2.7 million customers across Canada, the United States, and the Caribbean. Its largest businesses operate in Florida and Atlantic Canada.

Regulators approve the infrastructure investments these utilities make and the returns they can earn. That doesn’t eliminate risk, but it can make revenue and earnings more predictable than those of companies relying on discretionary purchases.

Emera stock plans to invest approximately $4 billion during 2026 and $20 billion through 2030. Those projects should expand its regulated rate base, allowing the company to earn returns from a larger collection of infrastructure.

Management expects adjusted earnings per share (EPS) to grow between 5% and 7% annually through 2030. It also believes 2026 growth could exceed that range. Meanwhile, operating cash flow before changes in working capital increased 8% during the first half of the year.

What $10,000 could produce

At a recent $69.33, Emera pays a $0.7325 quarterly dividend. That produces an annualized payment of $2.93 per share and a yield of approximately 4.2%. A $10,000 investment would purchase 144 full shares for $9,983.52. This could generate $421.92 annually, assuming the dividend remains unchanged.

COMPANYRECENT PRICENUMBER OF SHARESANNUAL DIVIDENDANNUAL TOTAL PAYOUTFREQUENCYTOTAL INVESTMENT
EMA$69.33144$2.93$421.92Quarterly$9,983.52

Unlike GIC interest, the dividend isn’t guaranteed. The shares can also decline, particularly over shorter periods. However, investors retain the potential for dividend growth and capital appreciation instead of locking in one fixed return. Holding the stock inside a Tax-Free Savings Account (TFSA) could also keep the dividends and future gains tax-free, provided sufficient contribution room is available.

Considerations

Emera stock carries substantial debt because utility expansion requires enormous upfront investment. Higher borrowing costs, unfavourable regulatory decisions, construction overruns, or weaker-than-expected earnings could pressure both the share price and dividend growth.

The stock also trades around 22 times trailing earnings, so it isn’t a distressed bargain. I’d invest gradually and keep near-term spending money safely outside the market.

Renewing part of a maturing GIC can be entirely sensible. That said, renewing everything simply because the cash has already arrived may leave long-term money earning less than it could.

Bottom line

For investors, protect the portion needed soon and put some of the remainder into a dividend-paying company such as Emera stock. The GIC can preserve tomorrow’s spending. The stock can work on the bills arriving considerably later.

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

More on Stocks for Beginners

Man holds Canadian dollars in differing amounts
Stocks for Beginners

Cash Feels Safe Again: This Is the Expensive Risk Investors Are Missing

Letting $10,000 sit in a TFSA feels safe, but it can quietly lose buying power if it stays uninvested.

Read more »

woman gazes forward out window to future
Dividend Stocks

The 5 Canadian Stocks So Safe I’d Tell My Mother to Buy Them

These five Canadian stocks combine durable businesses, strong competitive positions, and long-term resilience for cautious investors.

Read more »

Couple working on laptops at home and fist bumping
Dividend Stocks

$200 a Month in Tax-Free Income Is Closer Than You Think With These 2 TSX Stocks

Turn unused TFSA room into a $200 monthly, tax-free “paycheque” with two steady Canadian dividend payers.

Read more »

fast shopping cart in grocery store
Dividend Stocks

This 3.3%-Yielding Stock Could Turn a $7,000 TFSA Contribution Into $231 a Year

A single $7,000 TFSA contribution can start a tax-free dividend snowball with North West Company’s steady grocery business.

Read more »

A meter measures energy use.
Energy Stocks

The 1 Canadian Dividend Stock I’d Buy in Any Market

This Canadian dividend stock offers reliable income, steady growth, and a defensive business built to perform through almost any market.

Read more »

real estate and REITs can be good investments for Canadians
Dividend Stocks

The Dividend Stock I’d Buy Today and Hold Until 2036

A “meh” 2% yield can be far more valuable than a flashy 7% if it keeps rising for a decade.

Read more »

stocks climbing green bull market
Stocks for Beginners

If You Missed Shopify’s First Run, I’d Watch This Canadian Growth Stock Next

WSP may not be “the next Shopify,” but its record backlog and repeatable growth engine in infrastructure services can still…

Read more »

A child pretends to blast off into space.
Stocks for Beginners

Bombardier Stock Has Been Falling: Is It a Buy?

Bombardier stock has been falling after U.S. President Donald Trump’s recent remarks, but its improving financials, growing backlog, and stronger…

Read more »