We’ll start with a look at Global Dividends. Those dividends have taken the biggest hit since the financial crisis of 2007-2009. Of course the dividend carnage continued for a few years after 2009. In the recent pandemic stock market correction Global Dividends have fallen by some 22%. Only two countries (stock markets) managed to increase their dividends year over year in the second quarter – China and Canada.
And only one region was able to increase dividends, and that is North America. US companies held quite steady in regards to their dividend payments. Canada took us over the top. A Janus Henderson study showed that Canadian companies increased their dividends by 4.1%. When I look at iShares TSX 60 (ticker XIU) I see an increase of 4.4%.
And here’s the scorecard by region.
We see the biggest hits in the UK and the rest of Europe. Incredibly the UK saw dividends decline by almost 55%. A bright spot is emerging markets. That is a region that will get a lot of attention on Cut The Crap Investing in the coming weeks and months. We’ll look at the potential for longer term growth and greater returns for the stock and bond markets for developing nations.
Janus missed the oligopolies for Canada.
What was interesting in the Janus study is that they attributed Canada’s success to a less severe impact from the virus. Of course, Canada took its lumps with respect to the pandemic. Janus did not take the time to look at the oligopoly situation in Canada and the wide moats (lack of competition) for many of our major sectors, especially and including banking. Oligopolies and wide moats can lead to greater dividend sustainability.
And if you look to the US, they arguably have the worst record globally with respect to coronavirus cases and deaths. Their dividend payments have held up reasonably well. Of course, US stock markets are leading the charge on a global basis with respect to total returns.
With regards to our personal stock portfolios, we’ve still seen no dividend cuts among our 24 US and Canadian dividend payers. We’ve been treated to many dividend increases. Of course it’s not ‘all dividends all the time’. In the end portfolio success comes back to total returns and the risk levels of the portfolios.
Our business partner Mr. Warren Buffett recently did a little shopping in Japan. Berkshire Hathaway recently took positions in Mitsubishi Corp., Mitsui & Co., Itochu Corp., Sumitomo Corp. and Marubeni Corp.
And that was after bailing on a few US banks. In a rare event Mr. Buffett appears to be betting against America. He’s certainly no cheerleader for the US and US stock markets in the pandemic period. Heck, he even bought some gold.
This article in the Globe and Mail suggested that Japan is a very useful complement to patch some of the weaknesses in the very concentrated Canadian market.
In that article it was offered …
Consider this: Over the 10 years to the end of July, Japanese stocks more than doubled the payoff from Canadian shares. The iShares MSCI Japan ETF generated returns of 5.2 per cent a year on average compared with 2.4 per cent for the iShares MSCI Canada ETF. (All returns calculated in U.S. dollars.)Ian McGugan, Globe and Mail
And on fixing those holes …
One particular point of appeal for Canadian investors is the lack of overlap between here and there. In many ways, Tokyo is the inverse of Toronto. The sectors that dominate the Canadian index – banks, miners and energy producers – barely register in the Japanese market.
And going further for the many Canadian and US investors who have a North American bias (yes I am a guilty party), Japanese shares might act as a hedge for any continued weakness in the US dollar. You can gain access to Japan and other markets by way of a developing markets International ETF.
Those portfolio building blocks.
Once again, we are back to the core building blocks for a portfolio that I discuss on the ETF Model Portfolio page. It starts with Canadian, US and International stocks. We might move that to adding US and International bonds as well as offered in the New Balanced Portfolio. You’ll find some gold in that new balanced portfolio as well.
On Twitter I posted this reminder. A long period of underperformance can make us give up on an asset (such as Gold) or a region.
Almost all of us can fall victim to recency bias.
And in regards to the above chart and the US lost decade I also posted this, on the performance of the Canadian market.
You can follow me on Twitter @67Dodge.
More Weekend Reads.
In selfish fashion, I’ll start off with my weekly Making Sense of the Markets, on MoneySense. I submit the posts on Wednesdays or early Thursday before markets open. This week had a stock market bubble theme.
As you likely know stocks then fell some 6% on Thursday into Friday before recovering slightly late in the day on Friday. Sorry about even thinking about the possibility of a bubble and correction 🙁
And thanks to Mike at Dividend Stocks Rock for pitching in on that article.
And also on MoneySense and on some high flying stocks that split their shares, Bryan Borzykowski answers “One of my stocks just split. Am I richer now? “
And more answers on MoneySense – “We paid off our mortgage. Now what?“.
On Seeking Alpha, Mat Litalien looks at the performance of Canadian dividend cutters.
Only 50% of Canadians pay investment fees.
OK, to clarify, about 50% of Canadians think they pay fees on their investments. But that ‘awareness’ is improving.
Thanks to Rob Carrick for continuing to beat the drum, and thanks for that article.
It sounds like advisors are doing such a good job of keeping their clients informed. And so are regulators, ha …
New research confirms Canadian investors still can’t see fees not shown on statements.
Once again, please share this blog with friends and family.
And more on that theme on findependence Hub, John DeGoey says … Costs matter: But does your advisor care?
And on My Own Advisor, Mark offers his weekend reads. Mark has also delivered a financial goals update post this past week.
Rob at Passive Canadian Income reflects on the emotional challenges of living in pandemic times. The post also delivers his August results. Of course the personal is more important than the $$$. We’ve all faced and face challenges getting used to our new lives.
Here’s a very useful topic and consideration from eatsleepbreathefi – ESPP (employee stock purchase plan) and RSUs (restricted stock units). Know them and use them.
Here’s an interesting piece, Genymoney looks at the cashback app ampli.
On the virus front.
Yes, we’re all waiting for the effective vaccine, or that illusive herd immunity. We can’t wait for life to get back to normal. And you may have been reading or hearing about that T-cell defense against SARS-CoV-2, the virus that causes COVID-19.
The ‘cure’ for the pandemic may be the common cold. That is to say, those who have been exposed to many common colds (they are a coronavirus as is SARS-CoV-2) have cells that recognize this new coronavirus cousin – and they can put up a fight.
Here’s a very good post on the NIH Director’s Blog. Immune T-cells may offer long lasting protection against COVID-19.
That would be some game changing hope. T-cells plus good behaviour and a workable vaccine might be a potent combination that helps us get back to normal. Or perhaps back to ‘more normal’ might be more fitting. This is an endemic. The virus is here to stay.
As always – be careful out there. Respect the virus.
Thanks for reading.
Canada’s top-ranked discount brokerage.
Cut The Crap Investing readers can sign up with Questrade (Canada’s top-ranked discount brokerage) through this partnership link. You can buy ETFs for free.
Check out Canadian Robo Advisors.
And new to the asset allocation world – the TD One-Click Portfolios.
While I do not accept monies for feature blogs please click here on the mission and ‘how I might get paid’ disclosures. Those affiliate partnerships help me pay the bills for this site.
This week I will be posting my review of EQ Bank, where Canadians can earn 1.7% on their savings. And that’s not a teaser rate 🙂
I will also check in on the risk levels and performance of the portfolios at Justwealth.
Kindly share this post with the buttons shown below.