The Bank of Canada (BoC) cut its benchmark interest rate by 25 basis points to 3% on October 29, marking its third rate reduction in 2025 and signaling a definitive end to its quantitative tightening program. The move, coupled with the restart of asset purchases, is expected to inject fresh momentum into various market sectors, potentially benefiting entities from major domestic financial institutions to companies with capital-intensive projects.
Against this backdrop of easing monetary policy, investors are eyeing high-dividend stocks poised to capitalize on lower borrowing costs and improved liquidity. Here are three top contenders listed on the Toronto Stock Exchange (TSX).
As Canada’s largest bank, Royal Bank of Canada (TSX: RY) is well-positioned to lead a potential rebound in lending activity, leveraging its substantial deposit base and extensive retail network. Trading at $108.25 with a market capitalization of approximately $151.7 billion, RY offers a stable dividend yield of 4.1%.
In its latest quarter ended July 31, the bank reported an 8% year-over-year increase in adjusted net income to $4.1 billion. This strength was driven by robust performance in its personal and commercial banking unit and a recovery in capital markets. Adjusted earnings per share rose 10% to $2.78, supported by lower provisions for credit losses and revenue growth in key segments.
The BoC’s rate cut enhances RY’s appeal. Lower interest rates typically reduce banks’ funding costs and ease borrower repayment burdens, potentially stabilizing profit margins for major lenders like Royal Bank. Furthermore, the central bank’s resumed asset purchases are expected to benefit financially sound institutions through improved liquidity.
Among consumer cyclical plays, Restaurant Brands International (TSX: QSR) stands to gain from the supportive policy shift. Lower rates could boost consumer discretionary spending, providing growth tailwinds for the fast-food giant. QSR shares, priced at $93.05 with a market cap of about $30.5 billion, offer a dividend yield of 3.7%.
For the quarter ended June 30, the company posted a 16% year-over-year revenue increase to $2.41 billion. Consequently, adjusted EPS grew 9% to $0.94. The company is actively investing in global expansion, store renovations, and digital channels. A lower interest rate environment may reduce the capital costs for these initiatives, potentially boosting future profitability and driving share price appreciation.
With the BoC ending quantitative tightening and restarting asset purchases, Brookfield Asset Management (TSX: BAM) emerges as another compelling candidate. For this asset management behemoth, which oversees more than $1 trillion in assets, lower rates can unlock capital flows and expand fee-related earnings. BAM shares trade at $76.85, commanding a market cap of around $125.9 billion, and offer a quarterly dividend yielding about 3.1%.
Notably, the firm raised $22 billion in new capital during the second quarter. Fee-related earnings climbed 16% year-over-year to $676 million, contributing to a 12% rise in distributable earnings to $613 million. Brookfield plays a central role in major government partnerships and infrastructure projects. As liquidity improves and financing costs decline, its massive scale and long-term capital strategy may help it capture new growth opportunities.
Investment Note: While an accommodative monetary policy creates a favorable environment for these stocks, investors should note that equity investments carry inherent risks. Thorough research and consideration of one’s risk tolerance are recommended before making any investment decisions.
