My two longest continuous stock holdings are Enbridge and TC Energy, formerly TransCanada pipelines. I’ve held them for 15 years or so. That’s not necessarily a long time period for an investor, but my personal investment history is quite short. I was essentially wiped out by a business ‘partner’ at age 30. I had to start over. The restart investments were then used to purchase a home, and the wealth building focus for the following years became paying off the first mortgage. Investing took a back seat; we nibbled away though, modestly replenishing the RRSP accounts. TC Energy and Enbridge became portfolio staples. Pipelines are delivering the dividends on the Sunday Reads.
At My Own Advisor, Mark wrote about his decision to buy Enbridge over a decade ago.
He also offered …
In fact, when it comes to Enbridge, we now own enough ENB stock such that when dividends are paid – ENB dividends cover our condo utility bills (heating, cooling, gas, and water bills) every month.
Thanks to dividend growth and dividend reinvestment, those divvies can sure add up. And the dividends can also drive the total return.
Here’s Enbridge and TC Energy from the year 2000. Dividends are reinvested. There is no portfolio rebalancing. The market benchmark is the wonderful TSX 60 – XIU.
Dividends are sweet, but …
It is a ridiculous beat according to portfoliovisualizer.com
Dividends are sweet, but market-beating total return will obviously open up more doors for those in the accumulation stage and in retirement. And of course – past performance does not guarantee future returns.
Here’s the annual returns. We see that the pipelines offer a very defensive quality.
The pipes offered incredible performance during the dot-com crash of the early 2000’s. They did their thing again in the financial crisis of 2008-2009 and beyond. Enbridge and TC Energy were certainly out of favour during the recent ‘COVID correction’.
Given the pandemic plunge, the stocks have underperformed in more recent time frames.
That said, the dividends keep adding up.
Here’s the combined dividend growth history. Enbridge dividends are reinvested in Enbridge, the TC Energy dividends are reinvested in TC Energy.
The following is based on an initial $10,000 investment. No new monies are added, only the dividends are buying new shares.
After 18 years that $10,000 is delivering over $5,000 in annual income. Imagine what happens to the chart when you are also adding new monies on a regular schedule? See Mark on that one.
Head to portfolio visualizer and play around, it’s free to sign up. It’s easy to use.
On The Findependence Hub, Robb Engen of Boomer and Echo is not a fan of the above charts – portfolio income or total return. Hey, to each his or her own. Robb says we’re misguided.
We all place our bets. I believe that higher dividend yield and dividend growth investing (Dividend Aristocrats) will continue to outperform in Canada and the U.S.
Of course, these are the kinds of charts that create or inspire dividend investors, and bring on new dividend investors. Recently we built the $8,000,000 dividend portfolio on Sunday Reads. Perhaps that approach can be quite addictive? That $8,000,000 man didn’t know when to stop 😉
The Beat The TSX Portfolio
You’ll often find the pipelines and utilities in the Beat The TSX Portfolio.
The pipes are out of favour, BTSX says there’s value to be had. In my concentrated Canadian dividend portfolio I also hold the banks and telco’s. But investors and retirees should always consider greater geographic diversification.
I take a total return (dividend growth) approach with our U.S. stock portfolio. That link provides an update on returns, including the first half of 2021.
Things are working out OK …
We hold bond and gold and other commodities, bitcoin and more that you’d find in the greater balanced portfolio.
The ETF that delivers the dividends
For my wife’s accounts I do not expose her to the concentration risks. For her Canadian component she holds Vanguard’s High Dividend Yield ETF, VDY and the TSX 60 XIU.
Here’s a post on Vanguard VDY vs iShares XEI.
You’ll find the high dividend usual suspects in those ETFs. And of course you don’t have to embrace the dividend approach, though it may present some benefits to the retiree. Higher income and growing income can lessen that sequence of returns risk.
You’ll also find a sequence of returns post on Million Dollar Journey.
Investors can have incredible success with a core portfolio that you’d own by way of the all-in-one asset allocation ETFs. Check out …
To my liking, and to also protect from inflation, you might simply add the Purpose Real Asset ETF to any of those asset allocation ETF offerings.
More Sunday Reads
I will have to be selfish this week and start of with my MoneySense weekly …
It offers a dive into the ‘inflation is transitory’ argument. I also look at the kick off to earnings season, valuations and the mid-year update from BlackRock.
You can then head back to My Own Advisors for Mark’s weekend reads with – why the 4% rule does not work for the fire gang.
Related post: should you roll the dice with your retirement savings?
The fire gang is likely to get a lot wrong in the retirement stage. I’d strong suggest they study up on retirement funding models, and history. I suggest they consider economic conditions.
On Tawcan it’s a real user review of Questrade vs Wealthsimple Trade. It’s discount brokerage vs the trading app. That’s a good read.
On Savvy New Canadians, Enoch continues on that same theme with a look at some micro investing apps.
Here’s a Summer-edition personal finance round up on GenYMoney.
On The Retirement Manifesto some fascinating retirement stats and facts.
A Wealth of Common Sense wonders, are the roaring 20’s already here?
A good follow for the scary (but real) charts …
And yes we’re watching that wild card – the virus and its cousins, the variants of concern.
Does the pandemic end with a cold? or is much more in store?
Don’t forget to follow me on Twitter. You can also follow this site, it’s free.
We’ll see you in the comment section. Are dividend investors misguided?
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Consider Justwealth for RESP accounts. That is THE option in Canada.
At Questrade, Canadians can buy ETFs for free.
Make your cash work a lot harder at EQ Bank. RRSP and TFSA account savings rates are at 1.25%. You’ll find some higher rates on certain GICs. They now also offer U.S. dollar accounts.
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