The 3 Best Dividend Stocks to Hold When Interest Rates Rise


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The Bank of Canada (BoC) has kept the benchmark interest rate at an all-time low of 0.25% since March 27, 2020. It was urged to cut interest rates after the COVID-19 pandemic reached Canada and triggered the first round of blockades. Almost two years later, the central bank telegraphed that it intended to continue to tighten rates as soon as possible. Today I want to take a look at three dividend-paying stocks that are worth holding when the BoC prepares to hike rates.

Why Canadian bank stocks will benefit from rising rates

Canadian Imperial Bank of Commerce (TSX: CM) (NYSE: CM) is the fifth largest of the Big Six Canadian banks. Shares of this bank stock climbed 38% in 2021 to the close on November 25. However, the stock fell 1.1% month over month.

CIBC is set to release its fourth quarter and full year 2021 results before market opens on December 2. Banks have benefited from the credit expansion that has taken place in this low interest rate environment. However, the interest rate hikes will also help increase the profit margins of Canada’s major financial institutions. Earlier this month, I explained why rate hikes should encourage investors to invest in financial stocks.

The shares of this dividend stock have a favorable price / earnings (P / E) ratio of 11. Better yet, it offers a quarterly payout of $ 1.46 per share. This represents a yield of 3.9%.

Here’s a stock of alternative financial services dividends to watch out for in this climate

kid (TSX: GSY) is a Mississauga-based company that provides loans and other financial services to Canadian consumers. I had suggested investors catch up on goeasy throughout the March 2020 pullback. This dividend stock jumped 111% over the year-over-year period.

The BoC has warned that rising household debt levels will put pressure on Canadians as interest rates rise. Indeed, the financial health of the average Canadian was already in a worrying state on average by 2020. Fortunately, goeasy offers financial services to non-privileged borrowers. The demand for these services is likely to grow in a difficult economic climate.

In the third quarter of 2021, it saw loan portfolio growth of 60% to $ 1.90 billion. Meanwhile, adjusted net income was reported at $ 46.7 million or $ 2.70 per share, up 48% and 35%, respectively, from a year ago. This dividend stock last had an attractive P / E ratio of 11. He’s also a dividend aristocrat offering a quarterly payout of $ 0.66 per share, which is a modest return of 1.4%. .

One more stock of dividends in regional banks to be recovered at the end of 2021

Canadian Western Bank (TSX: CWB) is a regional bank that often goes unnoticed compared to its larger peers. The shares of these dividend-paying stocks rose 39% in 2021 to the close on November 25. Like CIBC, Canadian Western can also benefit from the improved margins that will result from higher rates.

The bank saw revenue growth of 16% in the third quarter of 2021 to $ 263 million. Meanwhile, loans increased 9% from the previous year to $ 32.3 billion. In addition, deposits issued by branches jumped 17% to $ 18.7 billion.

This dividend share also has a favorable P / E ratio of 11. It last paid a quarterly dividend of $ 0.29 per share. This represents a yield of 2.9%.

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