The Perfect Dividend ETF

Asset allocation, risk, diversification and rebalancing. Pros/cons of hiring a financial advisor. Seeking advice on your portfolio?
BRIAN5000
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Re: The Perfect Dividend ETF

Post by BRIAN5000 » 26 Jun 2017 15:26

Lazy Ninja wrote:
25 Jun 2017 13:18
That link didn't work for me. Try this:

https://www.theglobeandmail.com/globe-i ... e35453106/

Far from a perfect ETF in IMHO only 10% foreign and 55% into an interest rate sensitive portfolio of Financial, Utilities and Telecom. Mines not great either but at least I have 30% foreign and only 45% Financial, Utilities and Telecom.

Code: Select all

FINANCIAL  	    	25.0% including Banks, Insurance & other Financial
UTILITY   	     	20.0% including Power, Pipe & Telecom
CONSUMER        (US)	10.0% 
MANUFACTURING   (US)	10.0% could slide a Canadian railroad in here
RESOURCE               	10.0% material & energy
Reits Preferreds Multi	15.0%
Foreign ETF'S/Mutuals  (vti vea,vt)10.0%
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little bit longer and wish you would’ve sold early - this is just part of the game.” - Frank Zorilla via Abnormal Returns

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Re: The Perfect Dividend ETF

Post by AltaRed » 26 Jun 2017 16:07

Yield on market value is the only metric that matters when quoting yield. That is how it is done by any stock quote source. That said, total return is really the metric because one also has capital appreciation one can harvest for annual RRIF withdrawals when and if that occurs.
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Re: The Perfect Dividend ETF

Post by IdOp » 26 Jun 2017 19:11

deaddog wrote:
26 Jun 2017 10:44
Isn't yield on cost how you quote bonds, savings etc. Why do you consider it a BS number.
For bonds, there's the coupon yield which is based on maturity value, which is unlikely to be the cost unless you bought the bond at issue. You could also quote a current yield based on the coupon and the current market price. The usually quoted "yield" is yield to maturity which is really the result of a discounted cash flow calculation which takes into account both coupon and capital change to the maturity value (assuming no default). For savings yields, I think yield on cost and market value might be indistinguishable if you count reinvested interest as Buys; essentially there is no change in the capital value of the dollars in the account, unlike a stock share. There's an old thread on this forum where many views about yield on cost were given, so it's probably not good to re-start that debate in this thread.
I also hear dividend investors say that they are receiving x number % on their money while they wait for a stock to recover.
Depends what they mean by "their money" ... is that cost on present worth? If the stock is waiting for recovery, that means it's down so if it's YoC at least they're not using a pumped up number for the yield. ;)
For a buy and hold investor of dividend growth stocks, investing for income, I would think yield on cost would be a legit number.
I disagree. If the goal is income investing, you should look at what you can get on your money now. That may mean selling at market value and purchasing another investment with higher income yield on that value.

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Re: The Perfect Dividend ETF

Post by ghariton » 26 Jun 2017 23:21

IdOp wrote:
26 Jun 2017 19:11
If the goal is income investing, you should look at what you can get on your money now. That may mean selling at market value and purchasing another investment with higher income yield on that value.
:thumbsup: :thumbsup: :thumbsup:

The relevant cost for making decisions is the opportunity cost, i.e. what is the net benefit of the next best alternative, which you are giving up by making this choice.

In the case of securities, the opportunity cost of holding a particular security is the foregone benefit of not holding other securities. If the security in question is publicly traded and reasonably liquid, that reduces to the market value of the security.

For illiquid assets, the calculation is a bit more complicated. But the principle remains the same.

A simple analogy from a field other than finance. Suppose you are playing poker and it is your turn to bet. The amount you personally put into the pot is totally irrelevant. What is relevant is your chances of winning, and the size of your bet relative to the total size of the pot. Of course, your chances of winning depend on a host of strategic considerations. But those are all in the present or future. The past is irrelevant.

George
The plural of anecdote is NOT data.

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Re: The Perfect Dividend ETF

Post by Taggart » 27 Jun 2017 03:47

The theme of John Heinzl's article was not about looking for higher yields to replace the stocks you already own. His is not even a trading strategy.

He's quite upfront about what he wants and what he's looking for in a dividend ETF.

"But how come I still can't find a product that gives me everything I want in one convenient package - namely rising dividends, low costs and great diversification?"

As for myself, I've been doing this investing in dividend growth equities long before ETF's were ever around so I just over time created my own sector diversified, non-registered portfolio. Low cost, low turnover, and since I try my best to sell as little as possible, low taxes. I'm certainly not looking to sell a lower yield stock to purchase a higher yielder and incur a capital gain in the process. I'll leave that for others if that's their choice.

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Re: The Perfect Dividend ETF

Post by SQRT » 27 Jun 2017 08:37

AltaRed wrote:
26 Jun 2017 16:07
Yield on market value is the only metric that matters when quoting yield. That is how it is done by any stock quote source. That said, total return is really the metric because one also has capital appreciation one can harvest for annual RRIF withdrawals when and if that occurs.
Agree, of course. Hard to believe this is still debated here.

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Re: The Perfect Dividend ETF

Post by ockham » 27 Jun 2017 09:04

Cannew is a disciple of Tom Connolly's. I subscribed briefly to Connolly's Dividendgrowth newsletter 15+ years ago. Connolly uses "yield on cost" as a rhetorical concept to illustrate to bond investors the comparative advantage of dividend growth (dividends grow, whereas the interest payments on your 20 yr bond do not). Connolly's purpose is entirely rhetorical, he gives the concept no analytical weight. The danger is that some of his readers might.

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Re: The Perfect Dividend ETF

Post by Descartes » 27 Jun 2017 09:11

ETF? meh.

Dump all of your cash equally into the 5 big banks.
Let bake for 10 years and you will have doubled your income (even while spending the dividends each year!) .
Let it bake for 10 more years and you will have quadrupled it.
(based on the weighted average of dividend growth over the last 5 years)

You are pretty much tracking the TSX yet you have good, growing exposure to the US and international markets (i.e. indexing? pfft!)
Your portfolio is "too big to fail" (i.e. Ottawa will bail)
At the end of the bake you've still got your principal + all that capital gain from such a long time in the market (i.e. take your "total return" withdrawals and shove it).

Easy as pie. :P
"A dividend is a dictate of management. A capital gain is a whim of the market."

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Re: The Perfect Dividend ETF

Post by DenisD » 27 Jun 2017 10:58

Ottawa will bail the banks. But will they bail the shareholders?

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Re: The Perfect Dividend ETF

Post by AltaRed » 27 Jun 2017 11:16

DenisD wrote:
27 Jun 2017 10:58
Ottawa will bail the banks. But will they bail the shareholders?
The whole point for banking changes is so that Ottawa does not bail out shareholders. Yet there is a belief Ottawa will because of the institutional (read pension plan) holdings in such stocks.

I think the latter is probably true but shareholders will take a bath to perhaps $1-5/share and dividends will not be permitted for years thereafter (take a look at the 10 year chart for Bank of America for an example of how shareholders 'should pay').
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Re: The Perfect Dividend ETF

Post by cannew » 27 Jun 2017 11:20

ockham wrote:
27 Jun 2017 09:04
Cannew is a disciple of Tom Connolly's. I subscribed briefly to Connolly's Dividendgrowth newsletter 15+ years ago. Connolly uses "yield on cost" as a rhetorical concept to illustrate to bond investors the comparative advantage of dividend growth (dividends grow, whereas the interest payments on your 20 yr bond do not). Connolly's purpose is entirely rhetorical, he gives the concept no analytical weight. The danger is that some of his readers might.
Thanks for clarifying it and I agree. Sometimes we throw %'s around which sound good but are in fact meaningless. However, what I do or have found to be the most important item (which other can agree with or not) is that "Its the cash that my portfolio generates that really counts". Once I started concentrating on growing the income, not chasing yield, than I began to see the results I had hoped for but never achieved following other strategies. Others probably can achieve their goals with other objectives, but I never could.

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Re: The Perfect Dividend ETF

Post by SQRT » 27 Jun 2017 13:03

ockham wrote:
27 Jun 2017 09:04
Cannew is a disciple of Tom Connolly's. I subscribed briefly to Connolly's Dividendgrowth newsletter 15+ years ago. Connolly uses "yield on cost" as a rhetorical concept to illustrate to bond investors the comparative advantage of dividend growth (dividends grow, whereas the interest payments on your 20 yr bond do not). Connolly's purpose is entirely rhetorical, he gives the concept no analytical weight. The danger is that some of his readers might.
Understand and agree. I also suspect some of his disciples(term often means blind followers) use the metric analytically. Cannew may be one of them based on some of the yields he posts?

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Re: The Perfect Dividend ETF

Post by SQRT » 27 Jun 2017 13:08

Descartes wrote:
27 Jun 2017 09:11
ETF? meh.

Dump all of your cash equally into the 5 big banks.
Let bake for 10 years and you will have doubled your income (even while spending the dividends each year!) .
Let it bake for 10 more years and you will have quadrupled it.
(based on the weighted average of dividend growth over the last 5 years)

You are pretty much tracking the TSX yet you have good, growing exposure to the US and international markets (i.e. indexing? pfft!)
Your portfolio is "too big to fail" (i.e. Ottawa will bail)
At the end of the bake you've still got your principal + all that capital gain from such a long time in the market (i.e. take your "total return" withdrawals and shove it).

Easy as pie. :P
Not sure you are serious. But this strategy has worked for the ladt 50 years. But like they say" past performance........."

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Re: The Perfect Dividend ETF

Post by gobsmack » 27 Jun 2017 13:47

In the case of a RRIF, I was under the impression the broker will force you to withdraw the required amount each year. If this is true, even if cannew is calculating incorrectly (which I agree sounds very plausible), wouldn't the mistake be easily spotted by the broker? (e.g., broker would spot that the cash laying around from the dividends would not cover the required withdrawal and force him to sell additional shares). It sounds like it would be difficult to keep making this same mistake every year given that the disparity between his and the broker's calculations would be obvious.

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Re: The Perfect Dividend ETF

Post by Shakespeare » 27 Jun 2017 13:50

SQRT wrote:
27 Jun 2017 13:08
Descartes wrote:
27 Jun 2017 09:11
ETF? meh.

Dump all of your cash equally into the 5 big banks.
Let bake for 10 years and you will have doubled your income (even while spending the dividends each year!) .
Let it bake for 10 more years and you will have quadrupled it.
(based on the weighted average of dividend growth over the last 5 years)

You are pretty much tracking the TSX yet you have good, growing exposure to the US and international markets (i.e. indexing? pfft!)
Your portfolio is "too big to fail" (i.e. Ottawa will bail)
At the end of the bake you've still got your principal + all that capital gain from such a long time in the market (i.e. take your "total return" withdrawals and shove it).

Easy as pie. :P
Not sure you are serious. But this strategy has worked for the ladt 50 years. But like they say" past performance........."
I believe Norbert pointed out some years ago that there was a 'flat decade' for the banks. 1980's??
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Re: The Perfect Dividend ETF

Post by adrian2 » 27 Jun 2017 14:24

gobsmack wrote:
27 Jun 2017 13:47
In the case of a RRIF, I was under the impression the broker will force you to withdraw the required amount each year. If this is true, even if cannew is calculating incorrectly (which I agree sounds very plausible), wouldn't the mistake be easily spotted by the broker? (e.g., broker would spot that the cash laying around from the dividends would not cover the required withdrawal and force him to sell additional shares). It sounds like it would be difficult to keep making this same mistake every year given that the disparity between his and the broker's calculations would be obvious.
He's DRIPing (almost) everything, so it's not that simple.
I think he's withdrawing (at least partially) in kind.
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Re: The Perfect Dividend ETF

Post by Descartes » 27 Jun 2017 14:28

SQRT wrote:
27 Jun 2017 13:08
Not sure you are serious. But this strategy has worked for the ladt 50 years. But like they say" past performance........."
It is an exaggeration for the purpose of illustration:

1. Reliable dividend growth and a long enough runway can significantly reduce or even eliminate the need for cannibalizing your capital.
2. The large banks play a special dominant role in our economy and yet are growing significantly beyond it into the US and internationally.

The savvy Canadian investor would do well to exploit these facts.

Since 1999 the big five:
- increased their dividends between 315% (TD) to 760% (RY)
- had capital gains between 176% (CM) and 424% (RY).
"A dividend is a dictate of management. A capital gain is a whim of the market."

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Re: The Perfect Dividend ETF

Post by Taggart » 27 Jun 2017 14:46

Shakespeare wrote:
27 Jun 2017 13:50

I believe Norbert pointed out some years ago that there was a 'flat decade' for the banks. 1980's??
Perhaps other Canadian banks but not TD in the 80's in regards to dividend increases. TD was one equity that caught my eye at that time for dividend growth. I wasn't invested in them at the time though. Just kept looking at them out of the corner of my eye to file away in my mind for future use.

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Re: The Perfect Dividend ETF

Post by SQRT » 27 Jun 2017 15:20

Descartes wrote:
27 Jun 2017 14:28
SQRT wrote:
27 Jun 2017 13:08
Not sure you are serious. But this strategy has worked for the ladt 50 years. But like they say" past performance........."
It is an exaggeration for the purpose of illustration:

1. Reliable dividend growth and a long enough runway can significantly reduce or even eliminate the need for cannibalizing your capital.
2. The large banks play a special dominant role in our economy and yet are growing significantly beyond it into the US and internationally.

The savvy Canadian investor would do well to exploit these facts.

Since 1999 the big five:
- increased their dividends between 315% (TD) to 760% (RY)
- had capital gains between 176% (CM) and 424% (RY).
You are preaching to the converted here and suspect I am "longer bank stocks" than anyone else here. Their performance has indeed been impressive and consistent for at least the last 50 years. Actually embarrassed to say how "long" I am the banks. The comparison of div growth etween TD and Ry looks a little off, but only a quibble.

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Re: The Perfect Dividend ETF

Post by adrian2 » 27 Jun 2017 15:47

SQRT wrote:
27 Jun 2017 15:20
The comparison of div growth etween TD and Ry looks a little off, but only a quibble.
TD had a 2 for 1 split in that period.
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Re: The Perfect Dividend ETF

Post by SQRT » 27 Jun 2017 15:52

adrian2 wrote:
27 Jun 2017 15:47
SQRT wrote:
27 Jun 2017 15:20
The comparison of div growth etween TD and Ry looks a little off, but only a quibble.
TD had a 2 for 1 split in that period.
Yes, they split in 1999 and again a couple years ago. The comparison should be split adjusted, no?

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Re: The Perfect Dividend ETF

Post by adrian2 » 27 Jun 2017 21:44

SQRT wrote:
27 Jun 2017 15:52
adrian2 wrote:
27 Jun 2017 15:47
SQRT wrote:
27 Jun 2017 15:20
The comparison of div growth etween TD and Ry looks a little off, but only a quibble.
TD had a 2 for 1 split in that period.
Yes, they split in 1999 and again a couple years ago. The comparison should be split adjusted, no?
Yes, it should be.
I have no idea if the quoted numbers have been split adjusted, as it's not me who stated them.
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Re: The Perfect Dividend ETF

Post by Descartes » 28 Jun 2017 08:54

All of the 5 bank stocks have split once since 1999 except for CM which has yet to split and RY which has split twice.
Split adjusted dividend increases since 1999:
1. 2900% RY
2. 1520% BNS
3. 750% BMO
4. 632% TD
5. 324% CM
To illustrate with an example, presume you bought a modest 100 shares of each in 1999. You would have earned $380 a year in dividends. This year you would earn $3708 a year in dividends from the same original investment.

I will leave it as an exercise for the reader to calculate the capital gains on that original investment - I gave a few of the increases earlier in this thread.
"A dividend is a dictate of management. A capital gain is a whim of the market."

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Re: The Perfect Dividend ETF

Post by SQRT » 28 Jun 2017 09:22

Descartes wrote:
28 Jun 2017 08:54
All of the 5 bank stocks have split once since 1999 except for CM which has yet to split and RY which has split twice.
Split adjusted dividend increases since 1999:
1. 2900% RY
2. 1520% BNS
3. 750% BMO
4. 632% TD
5. 324% CM
To illustrate with an example, presume you bought a modest 100 shares of each in 1999. You would have earned $380 a year in dividends. This year you would earn $3708 a year in dividends from the same original investment.

I will leave it as an exercise for the reader to calculate the capital gains on that original investment - I gave a few of the increases earlier in this thread.
These figures surprise me. RY has grown their div 4 times faster than TD? I can't seem to get into longrundata which is my go to source for this stuff.

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Re: The Perfect Dividend ETF

Post by Descartes » 28 Jun 2017 09:34

SQRT wrote:
28 Jun 2017 09:22
These figures surprise me. RY has grown their div 4 times faster than TD?
RY split twice while TD only once in the quoted time frame.
Here are the raw numbers:

1999 quarterly dividend:
CM 0.3
BMO 0.24
BNS 0.1
TD 0.19
RY 0.12

Current quarterly dividend:
CM 1.27
BMO 0.9
BNS 0.76
TD 0.6
RY 0.87
"A dividend is a dictate of management. A capital gain is a whim of the market."

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