Dividend Investing in 2018. From Big Juicy Dividends to those Noble Aristocrats.

As much as Index Investing is taking over, Dividend Investing is capturing the imagination and wallets of so many self-directed investors.

This week of course, when we mention Index Investing we have to acknowledge the passing of the godfather of index investing Mr. John Bogle who launched the first index funds. He changed the investment landscape for the better to make the understatement of the week. It is estimated that his efforts have saved investors over $1 Trillion in fees. Mr. Bogle changed our understanding of what is successful investing, and he brought those lower fee products to the market.

Investing should be simple and cheap.

Mr. Bogle also provided some wonderful and whimsical quotes that frame the magic of index investing, and why it is mostly superior to active management. I use this one often …

With indexing we don’t look for the needle in the haystack, we simply buy the whole haystack.

And of course index investing has evolved from plain vanilla ETFs to include simple smart beta funds that can help investors better shape their portfolios.

We owe so much to Mr. Bogle. You can read the Vanguard release on Jonathan Chevreau’s Findependence Hub. I am proud to be one of an army of writers and advisors and financial institutions who will carry this mission forward.

And bring on those Dividends.

Of course indexing can be applied to Dividend Growth and Dividend High Yield investing. There are hundreds upon hundreds of ETFs that track the many indices created to capture that potential dividend magic of better risk adjusted returns, or greater and growing income. On that please have a read of this Sure Dividend guest post on Cut The Crap Investing, How Investing in Dividend Growth Stocks Can Work Wonders.

Here’s a key chart from that article tracking the US Dividend Aristocrats vs ‘the market’.


I include Model Dividend Portfolios on my Model ETF page. And in that mix you’ll find the US Dividend Aristocrats that is investable by the way of the US listed ticker NOBL, appropriately named. The Dividend Aristocrat fund invests only in S&P 500 companies that have increased their dividend every year for at least 25 years running.

Personally, I invest in Dividend Achievers that will include many Aristocrats, but the criteria begins at a 10 year history of dividend growth. That index is investable by way of the US ticker VIG, offered by Vanguard. Vanguard Canada also offers a Canadian listing for the US Dividend Achievers (in Canadian dollars) ETF – VGG.

VGG in Canadian dollars delivered a positive 5.18% return in 2018.

VIG in US dollars was down -2.1%

NOBL in US dollars was down – 3.2%

Benchmark S&P 500 in US dollars – 4.5%

Of course Canadian investors who hold US assets that do not currency hedge enjoyed a generous 9% boost in 2018 thanks to that strong US dollar.

Dividend Growth held up better (marginally) in 2018, for US Stocks. 

For Canadian dividend growers and bigger dividend payers it was a year of underperformance compared to the broader market index funds.

The Vanguard Canadian High Dividend Yield Index fund VDY has had a good run from inception, outperforming the market by 1% annual. Here’s my Seeking Alpha article on VDY. We hold that fund in my wife’s RSP accounts. I simply hold several big dividend payers with strong total return potential.

That said, 2018 was a down year for VDY -10% vs -9.1% for Vanguard’s All Cap Canada Fund VCN. Higher yielding stocks compete with bond yields and the fears of the rising rate environment put pressure on those stocks. Many of the companies carry higher debt loads as well and the potential of higher borrowing costs can also contribute to the price declines. All short-term ‘stuff’. These days you can buy a very generous underlying earnings yield and dividend at 4.4%.

The MSCI Big Juicy Dividend ETFs in 2018

  • iShares MSCI Canadian High Dividend Yield Index fund IDIV down -10%
  • iShares MSCI US High Dividend Yield Index Fund XDU was up 5.85%
  • iShares Global High Dividend Yield Index Fund XGD was up 1.1%

A blended portfolio of these 3 indices would have been down by -1.1% in 2018.

As you may know you can access these market-beating indices in a mutual fund portfolio courtesy of Tangerine Investments. Here’s my article on that, The Canadian Robo Advisors – The Tangerine Big Juicy Dividend Edition.

Those indices have a long-term history of beating the market in Canada, US and International. As always, past performance does not guarantee future returns.

On the CTCI Model Portfolio page I had ‘suggested’ a 50/50 split of Canadian and US MSCI High Dividend Funds. That mix would have been down by -2.1% in 2018.

Dividend Aristocrat Portfolio 

The Model Portfolio page offers the 50/50 US and Canada Dividend Aristocrat Portfolio.

In ‘Canadian Dollars’ NOBL would have delivered a positive 6.1% return.

The Canadian Aristocrats fund CDZ was down by -6.3% in 2018.

The Aristocrat Portfolio would have essentially been flat for 2018.

As always it’s crucial to have a long-term focus and incredible patience for every investing approach. Investment themes can take many years or decades to play out. While there is no guarantee of a repeat here’s CDZ vs the broad market from CDZ inception of October of 2006. We see the dividend approach succeed on that potential to outperform through market corrections. The outperformance show below is 1.4% annual for the period. Portfolio 1 is CDZ.

cdz vs market

And once again the outperformance of the US Aristocrats is well-known and well-studied. If history repeats this North American Aristocrat Portfolio might outperform the broader markets with less volatility and drawdowns in market corrections.

That divining rod of a meaningful dividend growth history has a habit of finding companies and sectors that can hold up a little better in market corrections. That’s due to overall greater financial health of the constituents compared to the broad market, and market sentiment – active managers will flock to what they see as ‘safer’ companies and sectors.

While it was a minor correction in 2018 we did see the Aristocrats hold up ‘a little better’ on both sides of the border. One point of difference, to qualify as a Canadian Aristocrat a company has to have increased its dividend for only 5 years or more. Canada is not a playground of companies that have a storied history of decades of dividend growth.

The US market is the king of the hill for dividend aristocracy.

Thanks for reading. Please always invest within your risk tolerance level. Do the research to find out ‘what goes where’ for greater tax efficiency and preferential treatment of foreign income.

Spread the word (sharing is caring) kindly share this post on Twitter, LinkedIn and Facebook. You’ll find the follow Cut The Crap Investing button at the very bottom of this page. 

4 thoughts

    1. HI @genymoney.ca my waytoomanyhours of research has led me to believe that we can simply buy a bunch of the individual stock. We can eliminate the fees altogether other than trading fees. That is for Canada and US. I’ve studying index skimming for quite some time. Then put my money where my mouth is, ha.


  1. dividend yielding stocks have long benefitted from the 35 year trend of ever descending interest rates. it appears we are at, or very near, the end of that road. in a big debt crisis, there’s no doubt that dividend payers will hold up better than the averages. on the other side of that crisis, however, i think we’re likely to switch to an inflationary regime with rising [nominal] interest rates. how do see the dividend stocks doing in such a scenario?


    1. Hi jk, thanks for stopping by and thanks for the comment. First off, we don’t know if rates will go higher or what kind of rate environment we might be in. Rates can stay low and have stayed low for decades. I think we look to the 40’s and 50’s for that evidence. I would also be of the camp that we don’t invest based on any macro guesses. I am with Warren Buffett on that. If we have a sensible and well balanced portfolio we might be prepared for most. If we enter a rising rate environment the income from any bond component will increase over time as well. But this is all very slow moving on that front. A shorter bond fund and ladder will move quicker of course on the rising income front. And again at the core of that dividend growth portfolio should be increasing dividends. Nothing wrong with increasing income in both camps.


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