Nostalgic for bonds with 5% yields? These blue-chip dividend stocks may help you get over it

I’m coining the phrase “yield nostalgia” for my fellow investors who have been around long enough to remember when it was possible to get a substantial return from bonds and guaranteed investment certificates.

Let’s use 5 per cent as a threshold. I remember stuffing a five-year GIC with a 5-per-cent yield into our sons’ registered education savings plan back in the mid-2000s. Today, half that yield would be typical if you’re GIC shopping. But if you’re open to 5-per-cent yields from blue chip stocks rather than GICs or bonds, you do have a few possibilities.

First off, we should make it clear that dividend stocks in no way substitute for bonds in a diversified portfolio. But if you’re an income-focused investor and have some leeway in your asset allocation, these 5-per-centers may be of interest because they’re blue chip companies with a history of dividend growth. Here’s the group.

• Enbridge Inc. (ENB): The yield was just under 6 per cent as of Nov. 11 and five-year annualized dividend growth was 16.3 per cent. A high yield such as this suggests investor skepticism that this pace of growth can be maintained.
• Pembina Pipeline Corp. (PPL): A yield of 5.1 per cent and five-year dividend growth of 6.4 per cent.
• Power Corp. of Canada (POW): A 5.1-per-cent yield and five-year dividend growth of 5.3 per cent.
• BCE Inc. (BCE): A 5-per-cent yield and dividend growth of 5.3 per cent.
• Canadian Imperial Bank of Commerce (CM): A 5-per-cent yield and dividend growth of just under 7 per cent.

To put these numbers in perspective, the yield on five-year Government of Canada bonds wavered between 1.5 per cent and 1.6 per cent in the early part of November. The 5-per-cent yields on these five blue chip stocks suggest they’re out of favour with investors, yet each of them except CIBC had a positive return for the 12 months to Nov. 11. CIBC was down just 0.6 per cent.

It’s hard to see bond and GIC yields getting even close to 5 per cent these days. Meantime, a few blue chip stocks may help you get over your yield nostalgia.