The Canadian Dividend Investing Playbook

A 9% dividend yield is not an opportunity. It is a question. The question is: why is the market pricing this stock so cheaply that the yield looks that good? Nine times out of ten, the answer is that the market knows something you are about to find out.

The yield trap works like this. A company pays a $1.00 annual dividend on a $20 stock — a 5% yield. The stock falls to $12 because the business is deteriorating. The yield is now 8.3%. It looks attractive. New buyers pile in chasing income. Then the company cuts the dividend to $0.60. The stock falls to $9. The buyers who chased 8.3% now hold a stock down 25% with a lower dividend. That is the trap.

BCE.TO cut its dividend in 2025 from C$3.99 to C$1.75 annually — a 56% reduction — after years of running leverage above 4x and missing FCF targets. Investors who bought BCE at $45–50 chasing the 8–9% yield held a stock in the $28–32 range with half the income. Yield was the warning sign, not the invitation.

Flip the question. Instead of asking "what is the yield?", ask: "Can this company afford this dividend for the next five to ten years, and can it grow it?" A 3.5% yield backed by a growing, well-covered dividend is worth more — in almost every real-money scenario — than a 7% yield on a business that is shrinking.

What actually matters: FCF payout ratio (below 60% is strong; above 90% is distress territory), net debt to EBITDA (below 3x for most sectors), and the trajectory of the underlying earnings. Yield is the output, not the input. Stop starting there.