Now's the best time to be in dividend-yielding equities, according to Barry Morrison, a manager of the Renaissance Millennium High Income Fund and CEO of Morrison Williams Investment Management. "It's one of the greatest opportunities in history," he adds.
"We've never had a situation where dividend yields on, say, bank stocks exceed the yield on Government of Canada bonds. You can actually earn 2% more owning bank stocks than owning 10-year Canadian bonds."
The last time that happened, rumour has it, was around the time of the First World War. But Morrison stresses there is no hard data to back that up.
It's even more important to seize the current opportunity, given the imminent decline in bond prices being called for by many market observers.
"I see tremendous danger in bond investment," he says. "We've had almost a 32-year bull market in bonds as interest rates have come down."
When the turn happens, Morrison expects it will be followed by three-to-five years of negative bond returns, and urges investors to consider dividend stocks instead.
"The trick is not just buying equities with good yields going in. You also have to identify companies and industries that can grow their earnings and raise their dividends. That's where you'll make the most money."
This advice also applies to institutional investors.
"If you think unfunded liabilities in pension funds are bad now, wait another three-to-five years," he says. "Pensions are going to have to be reduced, unfortunately, because [market] returns aren't going to be there to pay pensions down the road."
Most pension funds assume they'll make 6.5% to 7% a year, and if bond returns dip into negative territory, "you'll need a lot of return in equities to make up for it." Dividend stocks could help bolster that return.