With 2020 now behind us, Canadians can focus on bigger and better things in 2021.
The global pandemic has wreaked havoc on economies around the world, completely disrupting the financial situation of many. Unemployment levels spiked when the pandemic first hit, but it began to slowly decline and return to pre-COVID-19 levels.
It should be noted that the Canadian market has been extremely resilient throughout 2020. The global pandemic caused a 35% collapse at the start of the year, but the Canadian market recovered all of that loss and more throughout the year. rest of 2020.
The Silver Liners of 2020
Looking only at the performance for the current year of 2020, it may not seem like anything major has happened. But in reality, the severe levels of volatility and high unemployment caused by the pandemic have forced many Canadians to reconsider their financial situation.
Savings rates have actually increased throughout 2020, as Canadians have been reminded of the importance of putting money aside in an emergency fund.
Another positive sign of this pandemic is that it was the perfect opportunity for Canadians to really test the volatility and risk they are able to withstand in their portfolio. It is one thing to say that you are a risk averse investor who can weather the biggest stock market crashes. It’s another thing to experience one.
Now that we are in 2021, Canadians should have a better idea of what they would like their wallets to look like.
In addition to that, we were reminded of the importance of having an easily accessible emergency fund. As a rule of thumb, try to keep three to six months of living expenses in your emergency fund.
Invest in dividend-paying stocks
High-flying growth stocks received the most media attention in 2020. Canadian tech stocks like Shopify and Lightspeed POS made incredible bull runs during the market rally last year.
The revenue growth of some of these top-flight companies only increased during the pandemic, as did their valuations.
If you are looking to own a stock with a price / sell ratio in the 30+ range, you better be prepared for some extremely volatile times.
Dividend stocks has had mixed reviews in 2020. On the one hand, we have seen more than a handful of dividend-paying stocks put a temporary pause on its dividend increase. Some companies have even temporarily reduced the entire dividend.
Seeing a dividend cut is usually not a good sign for a business. It’s not great for investors either. Shareholders can count on this dividend as their main source of income.
On the flip side, the sudden spring 2020 stock market crash saw many dividend yields rise as stock prices fell.
For example, a stock that was trading at $ 50 per share that has an annual dividend of $ 1.50 per share has a return of 3%. But if that price drops to $ 37.50 and the company maintains its dividend at $ 1.50 per share, the return is now rated at 4%.
We have seen this happen in many Canadian companies over the past year. The big Canadian banks are a prime example, as every bank has experienced a massive drop in its stock price, which has resulted in a rise in its dividend yield.
My main dividend right now: Canadian Imperial Bank of Commerce
Speaking of Canadian banks, Canadian Imperial Bank of Commerce (TSX: CM) (NYSE: CM) is my main dividend to buy today.
Each of the Big Five Banks today is a solid buy in dividend stocks, but CIBC is my top pick.
CIBC is valued at a market capitalization of $ 50 billion, making it the smallest of the Big Five banks. It may be the smallest, but there is a lot of growth potential for investors.
Expansion into the United States is nothing new for Canadian banks. But for CIBC, that’s where the growth potential comes from. If the economy rebounds as expected in 2021, exposure to the US economy should benefit Canadian investors.
Finally, CIBC’s dividend yield. With an annual payout of $ 5.84 per share, that’s good enough for a return of over 5% over the current share price.
Not only is this one of the highest returns you will get from Canadian banks, it is also one of the most reliable. CIBC has paid dividends to shareholders since 1868.
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Nicholas Dobroruka, a silly contributor, owns shares of Lightspeed POS Inc and Shopify. Tom Gardner owns shares of Shopify. The Motley Fool owns stocks and recommends Shopify and Shopify. The Motley Fool owns shares of Lightspeed POS Inc.