![]() ![]() Royal Bank of Canada and certain of its issuers are related to RBC Direct Investing Inc. is a wholly owned subsidiary of Royal Bank of Canada and is a Member of the Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund. and Royal Bank of Canada are separate corporate entities which are affiliated. Please consult with your own professional advisor to discuss your specific financial and tax needs. The information provided in this article is for general purposes only and does not constitute personal financial advice. You can choose to have RBC Direct Investing automatically reinvest the cash dividends you earn on eligible securities into shares 2 of the same securites on your behalf. Read more about how a Dividend Reinvestment Plan (DRIP) works. This example uses the highest marginal tax bracket for an Ontario resident in 2018.įast Fact: Did you know that you can automatically reinvest your dividends? Taxation. Canadian dividends are taxed at a lower rate than interest income from bonds or GICs.Įxample: This table shows how the after-tax yield of a dividend is higher than the after-tax yield of interest from a fixed-income product because of tax credits. Business stability and earnings growth often leads to a higher share price over time. Companies that manage their cash flow effectively tend to maintain consistent or growing dividend payments. Dividends can provide investors with investment income. Dividends can help lower volatility by helping support the stock price. Receiving dividend payments on your stock can increase the total return on your investment. For example, companies that are still growing might choose to reinvest their profits back into their business to help grow it.įor investors, dividends can offer advantages in areas such as: Typically, dividends are paid in cash on a quarterly basis, although not all companies pay dividends. For example, some allow for unpaid dividends to accumulate, while others can be converted into common shares.ĭividends are a way for companies to distribute a portion of their profits to shareholders. Variety. There are many types of preferred shares, each with different features. (Note: preferred-share dividends come with the same advantageous tax treatment as dividends on common shares.) Higher income. Compared to common shares, preferred shares tend to pay higher dividends. ![]() Reliable income stream. Generally, preferred shares come with a fixed dividend amount that must be paid before any dividends are paid to common shareholders. Preferred shares can offer investors the following benefits: This means investors can buy or sell their investment for cash with relative ease.Īdvantageous tax treatment. Dividend income and capital gains are taxed at a lower rate than employment income and interest income from bonds or GICs. Liquidity. Typically, common shares can be bought and sold more quickly and easily than other investments, such as real estate, art or jewellery. The ability to vote means shareholders have some measure of control over who runs the company and how. Many companies pay dividends to their shareholders, which can be a source of tax-efficient income for investors. When it goes up, shareholders can choose to sell their shares at a profit.ĭividend income. The price of a stock will go up or down over time. ![]() The two main types of equity investments below can each offer investors different benefits.Ĭommon shares are the most (you guessed it!) common type of equity investment for Canadian investors. (Note that dividend payments from companies outside of Canada are taxed differently.) Different Stocks, Different Benefits These payments can provide you with regular investment income and enhance your return, while the favourable tax treatment for Canadian equities can leave more money in your pocket. Maximize. Some companies pay shareholders dividends 1 or special distributions. Equity investments can give investors better tax treatment over the long term, which can help slow or prevent the negative effects of both taxes and inflation. Protect. Taxes and inflation can impact your wealth. Investors may want to consider a long-term perspective for their equity portfolio because these stock-market fluctuations do tend to smooth out over longer periods of time. However, stock prices tend to rise and fall over time. Let's look at three benefits of investing in stocks.īuild. Historically, long-term equity returns have been better than returns from cash or fixed-income investments such as bonds. Like any investment, it helps to understand the risk/return relationship and your own tolerance for risk. Owning stocks in different companies can help you build your savings, protect your money from inflation and taxes, and maximize income from your investments. It's important to know that there are risks when investing in the stock market. Stocks can be a valuable part of your investment portfolio. ![]()
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