Dividend-paying stocks outperform
Source (both charts): RBC Capital Markets Quantitative Research, data is calculated on an equal weight basis, S&P/TSX Composite Total Return Index, December 1986 – June 2015.
Conventional thinking states that taking on higher risk is the only way to potentially achieve higher returns. However, as these charts illustrate, companies that pay dividends have not only historically outperformed the index by a wide margin, but have done so with significantly lower volatility.
Superior tax efficiency: It’s no secret that eligible dividends are one of the lowest taxed sources of investment income in Canada. From the lowest to the highest tax bracket, eligible dividends are taxed significantly less than interest and regular income.