{"id":3170,"date":"2025-07-14T08:00:15","date_gmt":"2025-07-14T08:00:15","guid":{"rendered":"https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/?p=3170"},"modified":"2025-07-11T15:12:21","modified_gmt":"2025-07-11T15:12:21","slug":"dividend-stocks-vs-bonds-2025","status":"publish","type":"post","link":"https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/dividend-stocks-vs-bonds-2025\/","title":{"rendered":"Good News! Why Dividend Stocks are Outshining Bonds Again"},"content":{"rendered":"

Blue-Chip Stocks Once Led the Way in Retirement Portfolios<\/span><\/h2>\n

For three decades after the Second World War the safest retirement income wasn\u2019t a government bond\u2014it was a basket of Blue Chips christened \u201cwidows-and-orphans\u201d stocks. From 1950-79, real equity returns in the United States averaged \u22489\u201310% a year while long-term government bonds lost about 1% in real terms (Dimson, Marsh & Staunton). Now the 1950’s playbook is being brought back.<\/p>\n

\"1950s<\/p>\n

Canadian Bonds Have Lost Real Value Since 2020<\/span><\/h2>\n

Canadian investors and advisors are waking up to a sobering realization, since 2020 bonds in Canada have generated total return losses of almost 5%. Inflation has increased by 20%. The difference is a 25% loss in purchasing power for bond holders over that time. Widow and Orphan stocks over the same period? Up over 100%!<\/p>\n

\"dividend<\/p>\n

YCharts.com \u00a9 2025 YCharts, Inc. All rights reserved<\/p>\n

Rising Debt and Interest Costs Mirror the 1950s<\/span><\/h2>\n

We find ourselves in an economic situation analogous to the 1950’s\u2014our debt levels are high and rising. The Parliamentary Budget Officer modelling shows interest costs overtaking the health care transfers as early as 2026-27 if rates stay near today\u2019s levels.<\/p>\n

Governments May Turn to Financial Repression<\/strong><\/span><\/h2>\n

When debt service crowds out programs, governments historically resort to financial repression\u2014keeping interest rates below the level of inflation and letting rising prices erode the debt in real terms. That is exactly what happened from the early-1950s through the late-1970s.<\/p>\n

Dividends Still Work: A Lesson From Elaine<\/span><\/h2>\n

Elaine\u2014one of my earliest (and largest) clients\u2014lived comfortably on dividends from banks, utilities and pipelines. When I once suggested \u201clower-risk\u201d bonds, she smiled and said in her clipped British accent, \u201cI don\u2019t like bonds.\u201d<\/em>\u00a0Elaine passed away almost a decade ago, but the past five years vindicate her instinct.<\/p>\n

How to Invest for Real Income in 2025<\/span><\/h2>\n

Three take-aways for 2025+<\/strong><\/p>\n

    \n
  1. Supplement long bonds with high-dividend equities <\/strong>to restore positive real income.<\/li>\n
  2. Accept some price volatility\u00a0<\/strong>and manage it with sizing, cash buffers and hedges rather than lock in negative real yields.<\/li>\n
  3. Stay tactical. <\/strong>If recession drives rates lower, we can add duration when bonds once again\u00a0pay<\/em>\u00a0investors after inflation.<\/li>\n<\/ol>\n

    Real Security Comes From Real Returns<\/strong><\/span><\/h2>\n

    The hard truth of investing is balancing \u201cholding fast\u201d with updating assumptions. Today\u2019s mix of high debt, rising interest costs and negative real bond returns suggests it\u2019s time to revisit those assumptions\u2014and position portfolios for real, not just nominal, security.<\/p>\n

    Watch the Video: Financial Repression 2.0<\/span><\/h3>\n

    Want to hear Glen\u2019s take in more detail? Check out our latest video on YouTube and subscribe to stay up to date.<\/p>\n