Philosophy of dividend investing?

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

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ghariton wrote: 19 Sep 2017 18:01 My first reaction is that investing in Canadian dividend-payers is a very concentrated strategy. It achieved a high rate of return over the period you cover. But I would fear that the lack of diversification might make the strategy vulnerable in downturns.

Out of curiosity, how much of the out-performance is due to the inclusion of the banks? If I were making a concentrated bet in 2000, next to technology (which proved a disaster for me), I would have chosen the financial sector. I bet I would have done great.
There were 2 big downturns during the period. The 2000 bust and the 2008 bust.

Roughly 200 of the 300 stocks currently pay dividends. So the banks don't represent much of the average.
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NormR
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Re: Philosophy of dividend investing?

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DenisD wrote: 19 Sep 2017 18:11 OTOH, I think Norm published an article recently showing that low PE was the best value factor in Canada over the past 15 years. Unfortunately, it's behind a pay wall. But ISTR reading the hard copy.
https://beta.theglobeandmail.com/globe- ... e36238603/
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Re: Philosophy of dividend investing?

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Doesn't work for non-subscribers.
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NormR
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Re: Philosophy of dividend investing?

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AltaRed wrote: 19 Sep 2017 18:24 Think it would be better to look at a longer history, albeit 17 years covers 2 traumatic periods. I tend to agree with George that Canada's dividend payers are skewed to the financial sector, albeit I suspect Norm would argue a lot of energy/resource companies pay dividends (and included in the list) imploded a few times, including the past 2+ years. I suspect looking at the US market would be somewhat different.
The U.S. numbers are different but share buybacks are also much more popular. Shareholder yield has fared quite well in the U.S.

The time fame chosen basically corresponds to roughly the period I'm comfortable with Bloomberg's back testing function for Canadian stocks.

Prof French has Canadian dividend data going back to 1977 (IIRC). It provides similar results. The no-dividend group lags far behind the market and has yet to recover to its peak in 1981.
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Re: Philosophy of dividend investing?

Post by rapporteur »

NormK cited the source:

https://beta.theglobeandmail.com/globe- ... e36238603/

However, AltaRed complained:
Doesn't work for non-subscribers.
But the solution for non-subscribers is simple: the cited page is on the wayback machine [www.archive.org]

Regards,
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Rob Carrick on Tom Connolly Dec, 2018

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My "go to" guy for many many years. Here is most of the article and if you can get behind the paywall follow the link-
https://www.theglobeandmail.com/investi ... -dividend/
The 93.4-per-cent yield and other tales from Canada’s dividend investing king

Canada is losing one its most useful, modest and consistent investing voices.

After close to 40 years, Tom Connolly is about to shut down his quarterly dividend investing newsletter, the Connolly Report. “I want to spend more time at the cottage and that kind of thing,” the 78-year-old resident of Kingston said.

Plainly printed in black and white, each edition of the Connolly Report is a jumble of numbers, charts, musings and quotes from the likes of Warren Buffett and Benjamin Graham, the father of value investing. You want slick? Read Fortune. If you want salt-of-the-earth investing wisdom with direct applicability to the lives of everyday investors, try Mr. Connolly.

Lots of investors have done just that. The Connolly Report has 150 print subscribers and there are another 800 who follow him via his website, DividendGrowth.ca. The website will continue into 2019, even after the newsletter is shut down.
Edited by ModeratorW
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Re: Philosophy of dividend investing?

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Same article here without fee:

http://v1.theglobeandmail.com/servlet/s ... robCarrick
Can you tell us about your portfolio and any others you look after?

Mine has five stocks, my wife has six and her sister has eight or so. Each includes a bank, a utility, a telecom and a pipeline.
A portfolio of five stocks. :shock: I will never have that kind of courage.
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Re: Philosophy of dividend investing?

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Dream2Retire wrote: 01 Dec 2018 19:10 Same article here without fee:

http://v1.theglobeandmail.com/servlet/s ... robCarrick
Can you tell us about your portfolio and any others you look after?

Mine has five stocks, my wife has six and her sister has eight or so. Each includes a bank, a utility, a telecom and a pipeline.
A portfolio of five stocks. :shock: I will never have that kind of courage.
I was surprised also. You would think that a guy who writes a newsletter would have a more diverse portfolio. If it’s thats simply (and I think it is) why pay for a newsletter.

My portfolio is only 10 though. In descending order:
TD/RY/BCE/T/ENB/TRP/PPL/BNS/BMO/IPL
Last edited by SQRT on 02 Dec 2018 10:11, edited 1 time in total.
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Re: Philosophy of dividend investing?

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SQRT wrote: 02 Dec 2018 08:07
Dream2Retire wrote: 01 Dec 2018 19:10 Same article here without fee:

http://v1.theglobeandmail.com/servlet/s ... robCarrick
Can you tell us about your portfolio and any others you look after?

Mine has five stocks, my wife has six and her sister has eight or so. Each includes a bank, a utility, a telecom and a pipeline.
A portfolio of five stocks. :shock: I will never have that kind of courage.
I was surprised also. My portfolio is only 10 though. In descending order:
TD/RY/BCE/T/ENB/TRP/PPL/BNS/BMO/IPL
I'm at 25 stocks. Trying to slowly cull the ones that are not dividend growers so much. That means next up to get rid of might be NWC and FCR. They grow the dividend, but only every 4 years or so. I don't think either company would make Mr. Connelly's list. FCR is a very well run company so that's why I hang on. NWC is a virtual monopoly in it's markets, but is subject to storms in the Caribbean and issues like that - although Giant Tiger, one of their companies, is doing pretty well.

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Re: Philosophy of dividend investing?

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I'm down to 12 stocks - 5 banks, 2 telcos, 2 pipes, 3 utilities.
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Re: Philosophy of dividend investing?

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Shakespeare wrote: 02 Dec 2018 09:56 I'm down to 12 stocks - 5 banks, 2 telcos, 2 pipes, 3 utilities.
What's the percentage of the overall portfolio for the above dozen ?

thanks
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Re: Philosophy of dividend investing?

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35%.
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Re: Philosophy of dividend investing?

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Mr Connolly's portfolio may be even riskier than that, since I understand he eschews bonds, ETFs or any other investments other than dividend growth stocks. I think he holds cash, though. His philosophy is to buy dividend growth stocks when they are cheap and to hold them for life. He will buy nothing for years, if he thinks the stocks are not priced attractively.

I suppose he is/they are slightly more diversified if you include his wife's account, though only if she holds six different stocks.

The one thing I don't buy is this 93.4% yield-on-cost myth. Not sure which stock is referred to, but no stock to my knowledge yields anything close to that. What you have there is a 3-5% yield, and a huge capital gain.
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Re: Philosophy of dividend investing?

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JaydoubleU wrote: 02 Dec 2018 11:48 The one thing I don't buy is this 93.4% yield-on-cost myth. Not sure which stock is referred to, but no stock to my knowledge yields anything close to that. What you have there is a 3-5% yield, and a huge capital gain.
From the article:
Bank of Nova Scotia. We bought it in 1990 at $3.64 (split-adjusted) and the annual dividend is now $3.40. That’s our first one that is going to be around 100 per cent (the yield now works out to 93.4 per cent). It took 28 years.
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Re: Philosophy of dividend investing?

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Still, am surprised an otherwise astute investor would even bring up yield on cost. It has no value beyond bragging rights, i.e. saying I historically picked the right stock sometime in the past. If I bought a stock back in 1933 that I still own today, I suspect I'd have a hell of a yield on cost. The more important message is the 'longevity' of the market performance of the stock. We all know that over time, a good dividend stock will have somewhat parallel share appreciation and dividend growth.
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Re: Philosophy of dividend investing?

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93.4% yield on cost is nothing! When I factor in ROC, my cost of CAR.UN is zero. Infinite yield on cost! :D
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Re: Philosophy of dividend investing?

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DenisD wrote: 02 Dec 2018 12:54 93.4% yield on cost is nothing! When I factor in ROC, my cost of CAR.UN is zero. Infinite yield on cost! :D
I have often wondered how do you treat ROC tax wise once your initial investment has been returned?
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Re: Philosophy of dividend investing?

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deaddog wrote: 02 Dec 2018 14:25
DenisD wrote: 02 Dec 2018 12:54 93.4% yield on cost is nothing! When I factor in ROC, my cost of CAR.UN is zero. Infinite yield on cost! :D
I have often wondered how do you treat ROC tax wise once your initial investment has been returned?
From the G&M
all further ROC distributions are taxed as capital gains.
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Re: Philosophy of dividend investing?

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Perhaps Connolly doesn't care about stock diversification because of his newsletter subscription income :?:
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Re: Philosophy of dividend investing?

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AltaRed wrote: 02 Dec 2018 12:38 Still, am surprised an otherwise astute investor would even bring up yield on cost. It has no value beyond bragging rights, i.e. saying I historically picked the right stock sometime in the past. If I bought a stock back in 1933 that I still own today, I suspect I'd have a hell of a yield on cost. The more important message is the 'longevity' of the market performance of the stock. We all know that over time, a good dividend stock will have somewhat parallel share appreciation and dividend growth.
Only for bragging. Often used by buy and hold div growth investors to try to impress others. I’m never impressed.
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Re: Philosophy of dividend investing?

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How is it materially different than people who brag about having an "X" bagger stock ?

Neither is a useful statistic for helping others.
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Re: Philosophy of dividend investing?

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SQRT wrote: 02 Dec 2018 16:42
AltaRed wrote: 02 Dec 2018 12:38 Still, am surprised an otherwise astute investor would even bring up yield on cost. It has no value beyond bragging rights, i.e. saying I historically picked the right stock sometime in the past. If I bought a stock back in 1933 that I still own today, I suspect I'd have a hell of a yield on cost. The more important message is the 'longevity' of the market performance of the stock. We all know that over time, a good dividend stock will have somewhat parallel share appreciation and dividend growth.
Only for bragging. Often used by buy and hold div growth investors to try to impress others. I’m never impressed.
I have a column in my investment spreadsheet for yield on cost, but I don't brag about it. (Nobody sees it except me.) It's there so I can see if I am bringing in more dollars than what I would have earned had I purchased a bond or GIC instead.

There are other odd statistics and trends that I keep track of that have meaning only to me, but I find them useful/entertaining.
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Re: Philosophy of dividend investing?

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Jo Anne wrote: 02 Dec 2018 17:45
I have a column in my investment spreadsheet for yield on cost, but I don't brag about it. (Nobody sees it except me.) It's there so I can see if I am bringing in more dollars than what I would have earned had I purchased a bond or GIC instead.
I subscribed to Connolly's newsletter years ago. I understood his use of the "yield on cost" concept as being a means to illustrate the return difference between a long term dividend stock holding and a long term bond holding. I don't recall him ever using it as some kind of stock selection metric.
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Re: Philosophy of dividend investing?

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Koogie wrote: 02 Dec 2018 17:33 How is it materially different than people who brag about having an "X" bagger stock ?

Neither is a useful statistic for helping others.
I consider holding an X-bagger to be a negative (in a non-registered account anyway). It means that I will eventually be liable for lots of tax when I crystallize the capital gain. It might also stop me from selling a stock that I should sell, letting the tax tail wag the value dog.

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Re: Philosophy of dividend investing?

Post by Flaccidsteele »

DenisD wrote: 02 Dec 2018 12:54 93.4% yield on cost is nothing! When I factor in ROC, my cost of CAR.UN is zero. Infinite yield on cost! :D
I was born with nothing, so I've only had infinite yields and returns all my life! :lol:

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