GICs are ready: This dividend stock is a much better income option

Guaranteed Investment Certificates (GIC) are great when the timing is right. They were great during the high interest rates because GICs paid Canadians something meaningful for simply parking cash. Many offered returns of over 5% with no effort and no risk, at a time when the stock market felt shaky. But now that interest rates have fallen and are expected to continue falling, those juicy returns have all but disappeared.

As a result, investors are stuck with much lower returns that can barely keep up with inflation. Meanwhile, high-quality dividend stocks and exchange-traded funds (ETF) offer better returns And long-term growth potential. That’s why GICs have shifted from “easy wins” to “missed opportunities” for anyone hoping to grow wealth rather than just preserve it.

When GICs Work, and When They Don’t

In recent years, GICs have been a no-brainer. Interest rates were at their highest level in more than a decade. Investors could lock in 4% to 5% with no volatility, no decision making and full principal protection. All at a time when inflation, market declines and economic uncertainty made stocks feel risky. But as soon as the rate cuts started, the window closed. Returns on GICs fell sharply, and suddenly investors were tying up their money for a much lower reward. Today’s lower GIC rates barely maintain purchasing power, let alone prosperity.

That’s where dividend stocks start to shine. In a lower interest rate environment, companies with healthy balance sheets and consistent cash flows can often pay dividends well above what any GIC offers. Unlike GICs, dividends also bring the potential for capital growth. Therefore, your money doesn’t just stand still; it can grow with the company. A lot of TSX dividend stocks now yield 5%, 6%, 7% or more. And unlike GICs, these payouts can increase over time. The combination of sustained income and long-term upside potential makes dividend stocks an attractive upgrade over today’s shrinking GIC yields, especially for long-term investors looking to build real wealth rather than simply preserve it.

Consider RPI

Richards Packaging Income Fund (TSX:RPI.UN) is one of the quietest but most resilient income-paying companies on the TSX. It provides packaging for healthcare, food, cosmetics and industrial customers in North America. Because its customers operate in essential, non-cyclical industries, demand for its products remains remarkably stable even as the economy falters. The stability has allowed Richards Packaging to maintain a reputation as a reliable cash flow generator. This makes it a favorite among investors who want income without taking on excessive risk.

Recent results show that Richards Packaging continues to perform reliably. Sales were flat year over year as the healthcare and food packaging segments offset weakness in discretionary consumer goods. Cash flow remained healthy thanks to strict cost control and a disciplined business model. While management acknowledged that growth has slowed since the pandemic-era surge in packaging demand, profitability remains healthy, debt levels are manageable and the company continues to produce predictably distributable cash.

Silly takeaway

RPI.UN pays a higher yield than most current GIC rates, and the underlying business is much more dynamic. The steady cash flow supports continued distributions that can remain stable even in slower markets. Meanwhile, the unit price has the potential to increase over time, an advantage that GICs simply cannot provide. And for now, here’s what investors could make with just $7,000.

COMPANY	RECENT PRICE	NUMBER OF SHARES	DIVIDEND	TOTAL ANNUAL PAYOUT	FREQUENCY	TOTAL INVESTMENT
RPI.UN	$28.10	249	$1.32	$328.68	Monthly	$6,996.90

For income-oriented investors, Richards Packaging combines reliability, defensiveness and long-term upside potential, making it an attractive choice to replace lower-yielding GICs in a TFSA or RRSP, while still keeping risk at a moderate level.