Philosophy of dividend investing?

Asset allocation, risk, diversification and rebalancing. Pros/cons of hiring a financial advisor. Seeking advice on your portfolio?
BRIAN5000
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Re: Philosophy of dividend investing?

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Better to spend/gift more while alive, I think. Haven't really figured out what/how yet. Good problem to have.
Yeah

Retired after 10 years is probably important. Retiring at a "normal" retirement age of 65 the first ten years are very important for sequence of return events and any other risks that don't come to mind at the moment. Retiring at 55 you have a period of 20 years where you might be venerable. I retired at 55 and have got by the first four years I think if I make it to 65 I will be able to see more clearly that I either have too little or way too much. That puts my daughter at 30 not a bad age for me to help her out.
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Re: Philosophy of dividend investing?

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Have probably already mentioned this in some other thread...
Our current plan (while acknowledging Robert Burns' words to a mouse about 'the best-laid schemes') is to live off portfolio income (retaining capital) from age 60-71, then start to draw from RRSP>RRIF's. At that time (after crystallizing any net gains over several years) we would gift the balance of the portfolio to our 2 children. How much (if any) we retain for our own needs will depend on our crystal clear outlook for the future at that time. :?
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Re: Philosophy of dividend investing?

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My bad for taking this thread off course somewhat. Suffice to say that each person's asset mix and withdrawal methodology depends on a number of factors including risk profile, mix of pension/annuity and portfolio, depth of stash pile, health, age, etc, etc. IOW, no one right answer.
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BRIAN5000
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Re: Philosophy of dividend investing?

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I guess my overall goal is income and growth in a dividend growth portfolio.

What's you cap rate distribution like?

Greater than 40 Billion between 10 and 40 billion less than 10 billion? Or what are your criteria 10B is a little big for small cap?
>40b ... 10-40b ... <10b....<1b
..21 .... 15 ........ 12........6

This is a mix of Can & US stocks.
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AltaRed
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Re: Philosophy of dividend investing?

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All I know is my individual common stocks are all in Norm's top 100 Retirement dividend stocks (plus 4 REITs). Big cap I guess.
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Re: Philosophy of dividend investing?

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AltaRed wrote:
SQRT wrote:I think carrying on till death just spending portfolio income doesn't make much sense.
Assuming a person has the resources to live off only pensions and investment income, I think an individual's view of actually doing this likely changes as retirement years progress.

Speaking only to how my views have changed on the subject, pre-retirement and perhaps even in the early years of retirement, the idealism/concept of living only off pensions and investment income feels good, i.e. confidence in not out-living money, bragging rights, accomplishment of a goal, thoughts of a legacy, etc.

After awhile, perhaps 10 years into retirement, it starts to look more and more like WTF? Why have a portfolio continue to (capital) appreciate over a long term average just to die under the weight of prosperity? We do not get any younger and we are likely to want to spend less and less as our physical and/or mental capacity/desire deteriorates.
Really good observations. The spending of capital is a real challenge for myself, and I suspect many others. I happen to be in the position that my indexed (pension + CPP) covers all my spending needs, and the investment income is just gravy that I often lavish on gifts to my kids and grand-kids, and yet I remain very conservative with my portfolio.

I would like to increase the equity portion of my portfolio beyond its present 30%, and have indeed inched up over the last few years to reach that 30% with much trepidation, but I just don't feel comfortable exposing myself to large capital loses'. My large FI asset allocation helps with that.

Perhaps as you say, that once you reach an advanced age, and you realize that you will indeed "die under the weight of prosperity", it will be time to turn on the tap, I don't know. If you spend a lifetime preserving capital, it is very difficult to simply undo all that programming. How can you watch every penny one minute and then the next throw it all away? Perhaps you'll require some wacky medical procedure that costs a fortune. Darn, if I only hadn't wasted all that capital on goofy stuff, I'd have the means to get repaired.

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Re: Philosophy of dividend investing?

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like_to_retire wrote:Perhaps as you say, that once you reach an advanced age, and you realize that you will indeed "die under the weight of prosperity", it will be time to turn on the tap, I don't know. If you spend a lifetime preserving capital, it is very difficult to simply undo all that programming. How can you watch every penny one minute and then the next throw it all away? Perhaps you'll require some wacky medical procedure that costs a fortune. Darn, if I only hadn't wasted all that capital on goofy stuff, I'd have the means to get repaired.
I only know I have loosened up the purse strings a lot. Annual expenditures today are twice what they were 10 years ago when I first retired. I still have great misgivings/stress/anxiety of being wasteful by throwing useful stuff out, or unnecessarily abusing quality goods that I have, but I have learned to pay up for more quality in goods and services, and more high(er) cost entertainment and recreation. I (and spouse) have found enjoyment in that so it is worth it to us.

Health costs are a wild card so I will make sure there will be plenty of reserve to pay for treatment stateside. Reminds me of a news item I saw some days ago. The new Hep C drug that is considered a miracle drug curing perhaps 99% of Hep C cases. A course of treatment costs $55-80k in Canada and few Canadians can access that under our health system until they are in late stages of life threatening condition, i.e. near liver transplant condition. I turned to spouse and said THAT was a perfect example of why we have money stashed away. I'd be on a plane next week to start that course of treatment if I had Hep C.

Added: Inspiration to have adequate resources came from several sources, but one experience in particular. When I was still with a full service advisor at Nesbitt Burns back in early 1990's. we were in to see our advisor one day and she told us she was leaving the next day with her husband to the Texas Medical Center in Houston where he was getting a $100k heart operation...because he was otheerwise going to be on a wait list in Canada. I said to my spouse at the time "That is where I want to be, the ability to do something just like that without second thought".
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Re: Philosophy of dividend investing?

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AltaRed wrote:Health costs are a wild card so I will make sure there will be plenty of reserve to pay for treatment stateside. Reminds me of a news item I saw some days ago. The new Hep C drug that is considered a miracle drug curing perhaps 99% of Hep C cases. A course of treatment costs $55-80k in Canada and few Canadians can access that under our health system until they are in late stages of life threatening condition, i.e. near liver transplant condition. I turned to spouse and said THAT was a perfect example of why we have money stashed away. I'd be on a plane next week to start that course of treatment if I had Hep C.

Added: Inspiration to have adequate resources came from several sources, but one experience in particular. When I was still with a full service advisor at Nesbitt Burns back in early 1990's. we were in to see our advisor one day and she told us she was leaving the next day with her husband to the Texas Medical Center in Houston where he was getting a $100k heart operation...because he was otherwise going to be on a wait list in Canada. I said to my spouse at the time "That is where I want to be, the ability to do something just like that without second thought".
That's exactly my point. If someone said to me I had to come up with $100K tomorrow to get a heart operation in the States, it would be a couple mouse clicks and I'd be there.

I guess it's a balance of having that capability, and not dying with a ridiculous amount of capital that we need to come to grips with in our advanced years...

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Re: Philosophy of dividend investing?

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like_to_retire wrote:
AltaRed wrote:Health costs are a wild card so I will make sure there will be plenty of reserve to pay for treatment stateside. Reminds me of a news item I saw some days ago. The new Hep C drug that is considered a miracle drug curing perhaps 99% of Hep C cases. A course of treatment costs $55-80k in Canada and few Canadians can access that under our health system until they are in late stages of life threatening condition, i.e. near liver transplant condition. I turned to spouse and said THAT was a perfect example of why we have money stashed away. I'd be on a plane next week to start that course of treatment if I had Hep C.

Added: Inspiration to have adequate resources came from several sources, but one experience in particular. When I was still with a full service advisor at Nesbitt Burns back in early 1990's. we were in to see our advisor one day and she told us she was leaving the next day with her husband to the Texas Medical Center in Houston where he was getting a $100k heart operation...because he was otherwise going to be on a wait list in Canada. I said to my spouse at the time "That is where I want to be, the ability to do something just like that without second thought".
That's exactly my point. If someone said to me I had to come up with $100K tomorrow to get a heart operation in the States, it would be a couple mouse clicks and I'd be there.

I guess it's a balance of having that capability, and not dying with a ridiculous amount of capital that we need to come to grips with in our advanced years...

ltr
Agree it s great to be in a position to afford expensive health care in US. My FIL did exactly that to the tune of about $150,000. Prolonged his life by probably a decade. Seems like a good reason to keep $500,000 -$1,000,000 in reserve. But I'm betting that a lot of us will die with multiples of that.

It is difficult to spend down your capital. Once you start, who knows, you might blow it all. But I'm thinking maybe half the excess appreciation over inflation in good years would be very safe?
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Re: Philosophy of dividend investing?

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SQRT wrote:It is difficult to spend down your capital. Once you start, who knows, you might blow it all. But I'm thinking maybe half the excess appreciation over inflation in good years would be very safe?
It obviously depends how much one has to start with. The vast majority of people do not have that luxury and have to be diligent with a SWR type plan that includes capital depletion.
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Re: Philosophy of dividend investing?

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Regarding waiting lists,
I know a handful of people who had heart surgery 'almost immediately'. One guy went for his annual on Friday and was never let out of the hospital, had bypass surgery on Monday. (A few years ago). I believe we are victims of 'superhyped' media hype. I am not suggesting you blow all your money on foolish stuff, by all means keep some for the surgeon in the U.S. who wants another Ferrari, but on the other hand don't lose any sleep.
I am going to live forever .... so far so good.
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Re: Philosophy of dividend investing?

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It obviously depends on one's condition. The Hep C example is a real live case today. OTOH, my spouse's son-in-law ended up in ER last week due to severe pain at 2am in the morning. It took them 8 hrs or so to even triage him (on morphine drip until then), found out he had to have his gall bladder removed, so they admitted him and by 11pm that night he was in surgery to remove his gall bladder.

My father was diagnosed with a mild heart attack circa 1990. He was admitted to hospital and heart bypass surgery within a day.

I wouldn't want to stay on the wait list around here for hip or knee replacement surgery. Could end up in pain for 2 years before getting surgery. No thank you.
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Re: Philosophy of dividend investing?

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Talk about thread drift :wink:

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Re: Philosophy of dividend investing?

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Yeppers.... I contributed to that. :oops:
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Re: Philosophy of dividend investing?

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AltaRed wrote:I wouldn't want to stay on the wait list around here for hip or knee replacement surgery. Could end up in pain for 2 years before getting surgery. No thank you.
Good experiences in BC. Friends have been treated for the pain until their number came up. One of them (very rich) said it is the pre and post-op treatment that is impractical to do on a fly-in. So the pain treatment lasted for 2 years while he waited.
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Re: Philosophy of dividend investing?

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AltaRed wrote:
SQRT wrote:It is difficult to spend down your capital. Once you start, who knows, you might blow it all. But I'm thinking maybe half the excess appreciation over inflation in good years would be very safe?
It obviously depends how much one has to start with. The vast majority of people do not have that luxury and have to be diligent with a SWR type plan that includes capital depletion.
Agree but there are a few here, apparently, that seem to be on a path of large excesses. This can be the case whether you have a WR that includes cap depletion or not. Also, even though I have generally only spent divs, these end up being 3.5-4.0% of my portfolio which might approximate a SWR including some cap depletion.
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Re: Philosophy of dividend investing?

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For those earning more than 200k from various sources in Alberta, the new tax changes drastically change the dividend vs CG landscape. There is still considerable eligible dividend advantage from 0-90k, but after 200k, there is substantial CG advantage.

HXT is suddenly looking more interesting.

Maybe we need a philosophy of capital gain investing thread. :)
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Re: Philosophy of dividend investing?

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couponstrip wrote:For those earning more than 200k from various sources in Alberta, the new tax changes drastically change the dividend vs CG landscape. There is still considerable eligible dividend advantage from 0-90k, but after 200k, there is substantial CG advantage.

HXT is suddenly looking more interesting.

Maybe we need a philosophy of capital gain investing thread. :)
Thanks for the link. A little higher than I thought. Looks like integration between Corp and personal rates re divs has been lost? If so they are discriminating against divs. Makes sense for a socialistic gov't I guess. Agree that for high earners divs no longer very advantageous. Too bad most of the good companies in Canada pay divs.
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Re: Philosophy of dividend investing?

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Yes, a CCPC will pay more tax on eligible div flowed through to the shareholders in 2016 than those same eligible dividends earned personally without a PC. However, if you have other sources of income to fund living expenses, the eligible dividends can be retained in the CCPC for now until the integration is repaired. At least I am assuming it will be fixed.

There is some friction with this plan in the sense that the distributions in a CCPC are taxed higher than those earned personally until they are refunded via the RDTOH mechanism. The loss of compounding on tax paid, but not refunded is suboptimal which is why it was advisable to pay out all eligible dividends from the PC up until now. However, this 'loss of return compounding' would only be substantial if the current situation persisted for many years or if your eligible dividends are very large.
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Re: Philosophy of dividend investing?

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Geez, I don't have the above problems. Sometimes it pays to be in the lower tax bracket where I don't pay any tax on Canadian dividends.
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Re: Philosophy of dividend investing?

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Yeah, I am in the situation (With about $5k of dividends per year in non-reg account) that the dividends actually reduce my taxes. Can't understand the logic of that but it is quite real.
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Re: Philosophy of dividend investing?

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chufinora wrote:Yeah, I am in the situation (With about $5k of dividends per year in non-reg account) that the dividends actually reduce my taxes. Can't understand the logic of that but it is quite real.
The logic is that you already paid at the corporate level. It is as if (though not really) the government withheld tax in your name at the corporate level. However, in reality, strictly speaking, corporations do not pay tax it is the owners (you and me) that pay tax. The DTC recognizes what you have already paid and if you have paid too much, the excess (in so far as you have tax otherwise in that particular year) is reimbursed. In some provinces (notably PQ) if all tax for year goes below zero the excess can be transferred to spouse.
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Re: Philosophy of dividend investing?

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StuBee wrote:
chufinora wrote:Yeah, I am in the situation (With about $5k of dividends per year in non-reg account) that the dividends actually reduce my taxes. Can't understand the logic of that but it is quite real.
The logic is that you already paid at the corporate level......
I understand the CCPC tax dividends, and equalizing tax paid between CCPC and individual, but these are public corporate dividends. In Ontario in the first tax bracket eligible dividends have a -7% marginal tax rate. http://www.taxtips.ca/taxrates/on.htm
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Re: Philosophy of dividend investing?

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couponstrip wrote:Yes, a CCPC will pay more tax on eligible div flowed through to the shareholders in 2016 than those same eligible dividends earned personally without a PC.
Can you elaborate the above? In my case, I have always flown them through and the CCPC pays zero tax on those dividends. The shareholders receiving the eligible dividends pay exactly the same tax as if those dividends were paid directly to them due to investing personally.

Where is the difference you're talking about?
Are you talking about a CCPC paying tax on income above the small business limit? Alas, it was never my case.
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Re: Philosophy of dividend investing?

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chufinora wrote:
StuBee wrote:
chufinora wrote:Yeah, I am in the situation (With about $5k of dividends per year in non-reg account) that the dividends actually reduce my taxes. Can't understand the logic of that but it is quite real.
The logic is that you already paid at the corporate level......
I understand the CCPC tax dividends, and equalizing tax paid between CCPC and individual, but these are public corporate dividends. In Ontario in the first tax bracket eligible dividends have a -7% marginal tax rate. http://www.taxtips.ca/taxrates/on.htm
Yes, I understood what you meant. I should have been clearer. Wherever I wrote corporate I meant a public corporation (not a CCPC) such as, for example, BCE, RY, etc...
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