This just in; big juicy Canadian dividends beat the market . That was the finding revealed in this Norman Rothery article in the Globe and Mail. I am sorry dividend deniers, it’s not good news. Big Canadian Dividend payers beat the market by some 3.8%, on average per year.
From that Globe article …
And here’s the performance chart …
Now the article suggested that there was good news and bad news. Of course the good news is that market trouncing. The bad news is that the higher yielding dividend group fell more than market in the last Canadian market correction of 2015 and into 2016. But in the other corrections for the period of study those dividend-centric companies held up better than market.
I personally had no problem with those lower prices in that minor correction. In fact I truly enjoyed buying more shares. Those shares and the juicy yields available helped to give my portfolio that final kick. The big dividends and dividend growth helps my current semi-retirement situation.
Bring on those lower prices says this dividend investor.
On Seeking Alpha I wrote on the enjoyment of those lower stock prices and larger yields. These were some of buying opportunities.
And in fact my little juicy Canadian dividend stock basket fell much less than the market in that correction. Perhaps that’s why my market beat isn’t as pronounced from that correction. Those who held the wonderful market index ETFs were offered even lower prices. Does this mean that you should only invest in dividend stocks and dividend ETFs? Absolutely not. Investing is a personal choice. We have to do what makes us feel comfortable. Sticking to your investment plan and adding monies on a regular schedule is more important than the Dividend vs Market debate.
To each his or her own.
There will be lots of ‘yabuts’ offered by those who openly mock Canadian dividend investors. Those higher yielding dividend stock screens are only finding greater profitability or value, or whatever. It’s true many dividend investors may not know exactly why they ARE winning. And more important than the numbers, those dividends help investors stay focused. Those dividends are a source of constant reinforcement with dividends being more predictable than market price swings.
Fire away in the comment section. Are your Canadian dividends stocks beating the market?
Weekend reads and follows.
I’ll kick it off, not with an article or podcast link but a ‘who to follow’. I always enjoy these two US bloggers who are early retirees. They made it happen in completely different ways. But the end result is financial freedom and some form of early retirement.
Here’s Fritz’s The Retirement Manifesto.
And from Panama Jim’s Route to Retire.
I know you’ll enjoy following their adventures.
If you want to check in on the Canadian FIRE blogger scene you can have a read of GenYMoney’s round up of rich Canadian bloggers. You can be sure you won’t find my name on those types of lists.
Milliondollarjourey offered this very solid article on the use of GICs vs Bonds.
Rob Carrick of the Globe and Mail looks at the stats of TFSA use in Canada. That is a wonderful program that many Canadians use, but not to the fullest. That article is packed with many interesting insights.
The country’s 19.5 million individual TFSAs had a total fair market value of $277-billion as of 2017, up an impressive 19 per cent over the previous year.
That’s a very significant amount of monies. I think we should take full advantage of the Tax Free program but I previously questioned whether CRA might eventually tax that program in some way.
On the TFSA program savvynewcanadians offered the many ways to make best use of that tax free opportunity.
Robb Engen had offered this very important look at folks kicking debt down the road.
Mark of myownadvisor offered his latest dividend update. His goal is to earn $19,400 in dividend income for 2019. Stay tuned.
Here’s sixth sense or nonsense on the findependencehub. And from that post …
From the land of Robo’s.
Wealthsimple announced that it will sell off the advisory referral business. They will concentrate on that direct to consumer channel.
And on the Robo returns watch Justwealth posted their performance numbers to end of November 2019. Those returns include their RESP target date portfolios.
You can check in on and compare Wealthsimple returns here .
And here’s the most incredible look at risk and returns history table, courtesy of Paul Merriman. That table frames the risk and returns history of US stock and bonds with multiple risk-level allocations. I could look at that table all day, I might. Again.
This week I offered one of my most popular posts of the year on the wonderful development of advice-only planners. I followed up with – do you really need a financial planner? I do suggest that at some point we can all benefit from expert financial planning.
Thanks for reading. We’ll see you in the comment section.
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While I do not accept monies for feature blog posts please click here on the mission and ‘how I might get paid’ disclosures. Affiliate partnerships help me pay the bills for this site. That will allow me to keep this site free of ads, and hence, easy to read.
Check out EQ Bank for those who want to make their cash work a lot harder. The current high interest savings account rate is 1.5%. EQ Bank recently introduced RRSP and TFSA accounts with a rate of 2.3%. You’ll also find GICs.
I also have partnerships with several of the leading Canadian Robo Advisors such as Justwealth, BMO Smartfolio ,Wealthsimple and Questwealth from Questrade.
At Questrade Canadians can buy ETFs for free.
Thanks for reading, we’ll see you in the comment section.
Dale
Valuation is everything. Temperament – your pain tolerance in particular – are also key. Patience can be rewarding …. I also look for yield and growing dividends. Last year it was Canadian Utilities with the longest dividend growth streak on the TSX, Another at the time recent 10% hike and a yield over 5% – the highest of the century, even higher than in ’09 attracted my interest and I bought quite a lot.
I also bought heavily in 2009 when the world was ending but it was gut wrenching. In my opinion buying CN Rail, Fortis, Canadian Utilities, TD Bank and doing nothing except adding will probably pay off in the long run unless struck down by the unforeseeable. Manulife was my bug on the windshield but that’s why you don’t bet the farm on any “sure thing”. And then again selling Metro due to impatience was just plain dumb.
I don’t own bonds and I used to 20 years back. You can get clobbered there too. Two employees at TD cautioned me to NOT sell ATT Canada when it was at 75 cents on the dollar … later the company was sold to Manitoba Telecom and I got a debt equity swap which worked out to 32 cents per bond. And so it goes.
So here I am in my late 60s and VERY glad I struck out on my own with an ALL dividend paying portfolio which has performed 95% brilliantly for over a decade. And the taxes? Unbelievable … I’m almost embarrassed to admit it to anyone but it’s legal – my reward for risk. However if the average Canadian really understood the dividend income tax credit, both federal and provincial they would be up in arms. But they probably won’t and I can count on one finger the ONLY person I’ve ever convinced to to at least get inspired by my portfolio … And he’s very very happy he did.
Of course it can all collapse – there’s plenty of prophecy out there to suggest a horrid personal financial future. But I’ll end with a quote from Ben Graham written at the height of the Great Depression in 1934 “Since market value in most case has depended primarily upon the dividend rate, the later could be held responsible for nearly all the gains ultimately received by investors.”
So far it’s more than half in my case.
Thanks Barry, great comment. So happy to read that you found what works for you and allows you to stay focused. The financial crisis was certainly more than challenging. I worked on Tangerine US exclusively and was laid off. That made things a little more trying.
Who knows when the next correction might come. We simply have to be prepared.
Dale
Great article!
I realize that dividends investing is a possible way to beat the market. I dabbled with it for a few years but realized I knew nothing of company valuation and what and when to buy. So I switched to a 3 ETF portfolio a while ago and am thrilled to keep things simple and remove any decisions with my investments. I just add money to the ETF that is lagging and keep my allocation within my targets (which is essentially buying low). Works for me. Dividend investing didn’t work for me and I didn’t have the knowledge (or time) to stick with it.
Thanks KB. Yes as per article it’s not for everyone. If you’re staying the course and going at a few ETFs on a regular basis, that’s awesome. Congrats. I think the key is to be completely passive (emotionally) and stay the course no matter what investment style we embrace. In the accumulation stage. Buy. Hold. Add.
Get out of our won way 🙂
Thanks so much for stopping by … I hope you’ll continue to contribute.
Dale
Thanks for the mention Dale!!
My pleasure, of course. I always look for your posts.
Dale
This is in response to Fritz’s Retirement Manifesto.
I thought it was a very interesting and most impressive article. The 94 yr old couple is obviously incredibly impressive in so, so many ways.
I liked a ton of stuff about the article but to me, the best part was part 2 of the old guy’s response to the key to a happy retirement – “stay happy”. Not sure on the “stay busy” part but totally on board on the “stay happy”.
My wife and I have been retired for 6.5 amazing years and are happier than ever. We have a very simple retirement with lots of family (mainly grandkid) stuff, lots of outdoor activities (running, walking, hiking, biking, camping, x-c skiing, skating, and on and on), and lots and lots of relaxing.
Why I like the “stay happy” idea is that I don’t think a retiree needs to have a bunch of personal development stuff. I’ve read this is so many places where people say that retirees should keep learning, contribute to society, do meaningful stuff, etc, etc . This might indeed be what makes some people happy but I sure don’t want to do it (call me selfish or whatever). I’m happy with who I am, what I do, and how I live my life at this stage without doing things to “fill” my time or try and make myself a better person.
Anyway, its obviously a sensitive point with me as I don;t like anyone ever telling me what they think I should be doing.
Ciao
Don
Hey Don, thanks for that comment. That is refreshing. Yes, we’re all different of course. We’re all snowflakes. We will all find our happiness (I hope) and in many different ways. We all find purpose in very personal ways. And I can feel that it evolves as we leave the workforce.
You sound very content.
Thanks as always for sharing on the site.
Dale
I think it would be interesting to see a similar chart where companies were segregated not only by dividend yield, but also by dividend growth rate. I’d bet high dividend growth beats high yield over time. I have found that over time the price CAGR is not too far off the dividend growth rate. And high yield/low growth often has a low price CAGR.
Hi Ed, I’ve seen tons of studies on this, for US dividend growth stocks. There was a sweet spot on yield groupings, I’ll try and find that. The yield plus dividend growth rate stuff did not work, it was counter productive. They called it the Chowder rule, after a writer handle. Modeled somewhat after the dividend discount model ‘stuff’. I think in Canada we might just look for financial/dividend health and pick our sectors. I like avoiding the cyclical sectors. Too old for the heartbreak. Ha.
Dale
I hope you can dig up those studies. I’d love to see them!
I’ll look it was Canadian portfolio modeler Kurtis Hemmerling on Seeking Alpha who did many of them.
Dale