The Globe and Mail reports in its Tuesday edition that at the start of the year, Bank of Montreal shares were trading at $96.78 apiece in Toronto for a yield of 4.4 per cent. Globe columnist Gordon Pape writes that now, BMO shares were trading at $126.12 and the yield is down to 3.4 per cent. You have more capital, but your return on that portion of your invested money has been reduced.
You will find the same thing with most of your income stocks. Even if a company has raised its dividend, the increase in the share value probably means it is yielding less that it was six months ago.
One solution to this challenge is to move some assets from lower-yielding securities into higher-yielding ones. There is some risk involved in this -- higher yielding securities are generally seen to carry more downside potential. Investors also need to look at the tax consequences of any move, although inside a registered plan such as an RRIF, RRSP or TFSA, that will not matter.
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