In the face of turbulent markets, fixed-income managers are favouring high-yield dividend stocks in banking, energy, healthcare and utility sectors, according to a panel of experts at the Canadian Institute of Financial Planners 2012 annual conference held in Vancouver Tuesday.

“It’s a boring “steady Eddy” strategy, but it’s what works,” said David Sykes, vice-president and director with TD Asset Management Inc., the asset management arm of Toronto-Dominion Bank. He manages the TD North American Dividend Fund, TD Global Dividend Fund and TD U.S. Monthly Income Fund.

“Going forward, it’s low interest rate environment, [and] we hope to find [alternatives to bonds] in the equity markets,” added Doug Warwick, managing director and portfolio manager, TD Asset Management Inc.

Currently, the payout on five- to 10-year Government of Canada bonds is about 1.6%. Similarly, 10-year U.S. treasury bills have been hovering around 1.7%. By looking to high paying dividend stocks in equity markets, Sykes said the goal is to achieve a yield of 7% or 8%.

Of the blue chip firms traded in Canada, Warwick leans towards companies with large free cash flows, as well as those that pay steady dividends. These tend to be firms in the banking sector, as well as real estate income trusts (REITs). He is also bullish on firms within industries that have large barriers to entry, such as utilities.

“We want the dividends [of these firms] to grow over time,” added Warkwick, who manages the $468 million TD Dividend Income Fund, and the $597 million Dividend Growth Fund.

Sykes also likes healthcare, industrials and other sectors in which firms are capital-heavy. He said that firms that pay dividends that operate within emerging markets such as China also represent an opportunity.

Both analysts favour the energy industry. “It has a track record of stable steady and increasing dividends,” Sykes said. The bulk of consumer demand for oil will continue to come from the U.S., despite growing energy demand from China.

The fact that the supply of oil available worldwide is still pretty tight ensures these dividends will continue, added Warwick. “As developing world growth has continued, net oil demand has also increased.”

TD Asset Management will be launching six new tax-preferred funds with a dividend focus later this year.