The June 2014 Connolly Report has a list of all the 50 Canadian common stocks which have increased their dividend five years in a row. It is in order of C.A.P.E. (cyclically-adjusted price to earnings ratio) so you can tell which are less expensive.


$½↓ HALF GONE SOON $↓½ - thoughts…May 2014

If you have savings invested in broad equity mutual funds (and most are as they hold scores of stocks) or if you have an index fund, there is a very good possibility that you will lose half of your money in the next few years. The gains you were expecting to earn by investing are on the table now. Take them! Markets are cyclical. Valuations are close to extremes. Get out of equities which do not grow their dividends before the downdraft. Do not go into bonds: they are way overvalued too (ten-year Canada bond down to 2.26%). Hold cash. Wait for safer valuations. Control your behaviour. Ignore the sell-side material you see in the press. You do not want to buy high.

On the other hand, those of us who hold dividend growing stocks purchased years ago, can't sell and do not wish to sell. These assets generate our retirement income. We actually plan not to spend our capital. Market gyrations, therefore, do not affect our our retirement income. As we (dividend growth investors) are not going to sell, the price really does not matter. Capital gains, until realized, are hypothetical anyway. Just now we are culling the few duds (poor dividend growers) we own. Inside this site I am more specific.

This is the fundamental difference between what dividend growth investors do and what most everyone else does. Ours is a whole different way of thinking, of investing. The financial plan you read of in the press are mostly wrong. We focus of the growing yield our common stocks provide in retirement. And, if the cash a company throws off is growing, it's most likely the stock price will rise also.

One of the portfolios I keep an eye on began life with $200,000 in 1998…one hundred percent in dividend growing common stocks, gradually purchased. The portfolio now generates $28,800 in annual tax-free Canadian dividend income. Last year alone, income increased by 7.3% ($1,160 more). That's the dividend growth retirement plan. *

Begin dividend growth after the market downdraft when valuations fall. The current market cycle is long in the tooth.

Never having purchased a mutual fund, I was fascinated to learn from Rob Carrick (ROB May 10 2014) that RBC's Canadian Dividend Fund had a dividend of 66¢ in 2009 and 2010. Now this fund's dividend is 55¢. Dividends paid by the country's biggest dividend fund went down by 11¢ over this period. So much for dividend growth inside mutual funds! This could be the reason why mutual funds do not disclose yield on their funds. To benefit from the wealth building of dividend growth, you have to buy individual dividend growth stocks and hold them, and hold them to gradually build yield.

* My wife's BMO shares, purchased in 1987 began by paying a dividend of .026 cents each quarter (adjusted for stock splits). Now each BMO share pays 76¢ per share every quarter ($3.04 a year). She has a couple of thousand shares. Is she worried about the market prices falling? No way. She can't sell the golden goose. And it's tax-free income. BMO's dividend have been growing at close to 10% over the last decade. ♣ When are you going to begin dividend growth investing? There are some fifty good dividend growth stocks like this to select from. Most are detailed inside this site for subscribers. They are, generally, to expensive to buy just now, but you could ready your cash buy selling funds. The February 2014 Connolly Report, for instance, had a list of 35 'other' dividend growth stocks showing (as well as the five year dividend growth rate and how long each stocks had been growing dividends) three valuation measures for each (yield, Graham value and ten-year cyclically adjusted p/e). We try to buy when the stocks are at least fairly priced. From this list, I've added a couple new dividend growers to my main list.

  • ETF THOUGHT - I reckon a lot of folks get sucked into ETFs because ETFs have lower fees than mutual funds. It's true. But, the major problem with both of them is the same. When you come to retire, there is little income flow from these assets. You have to sell to get your money. If the market is low, as it will be soon, SORRY FOR YOUR LUCK. Dividend growth investors do not have to sell. We set up our income flow from individual stocks years before we retire. Market fluctuations do not bother us.
second_quarter_2014.txt · Last modified: 2014/08/17 08:36 by tom
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