Q: One member, Auftar, mentioned that they plan to keep BCE and Telus in their soon-to-be-converted RRIF portfolio because the high dividend yields from these stocks will help manage the RRIF withdrawal rate. With BCE and Telus offering dividends of 10% and 7% respectively, assuming no cuts, these stocks can provide a solid return for annual RRIF withdrawals.
My question is: Is holding high dividend stocks in a RRIF a good strategy in both stable and volatile markets? Even if my portfolio value drops, I will still receive dividends for my RRIF withdrawals each year. Am I correct?
My question is: Is holding high dividend stocks in a RRIF a good strategy in both stable and volatile markets? Even if my portfolio value drops, I will still receive dividends for my RRIF withdrawals each year. Am I correct?
5i Research Answer:
We do not mind the strategy, as high dividends can fund withdrawals from a RRIF. But it is extremely important to note that no dividend is guaranteed. Even BCE cancelled its dividend once (when it was planning a privatization). Any high dividend will typically imply higher-than-normal risk, and such a strategy needs to be comfortable with that.