# small portfolio of dividend stocks



## joncnca (Jul 12, 2009)

does anyone keep a small portfolio (about less than 10 or so stocks and/or funds) that covers everything they need (i.e. diversification, decent return)?

is it possible to have such a low number of dividend paying stocks/funds, and still be diversified (between countries, sectors, market cap, etc.), and still get a decent return? i personally have come to really like the idea of dividend payers, so these would be heavily represented.


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## Argonaut (Dec 7, 2010)

I listed my portfolio of outperforming dividend stocks in one of your other many threads. Despite my minimal expertise, the list was worth at least twice what you paid me for it. I won't list it again. It sounds like you may need a financial advisor, or at least devote some time to researching for yourself.


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## marina628 (Dec 14, 2010)

I have TD , BNS ,CM ,FTS ,SU ,ENB ,SLF ,CNQ . I have added CNQ and SLF this year the others I have been buying for few years.
For US /Global been buying index funds rather than Individual stocks ,mainly because I have much homework to do on that .


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## atrp2biz (Sep 22, 2010)

I think 10 is more than enough.

TD, JE, IMO, TRP, BPO, XHY
BP, GE, SCHW

Looking to expand in the near future with FTS, CNR, MCD (US), PSA (US) and either PM or MO (US).

Just remember to keep all of the US dividend payers in your RRSP.


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## Jungle (Feb 17, 2010)

atrp2biz said:


> Just remember to keep all of the US dividend payers in your RRSP.


What if your current tax bracket is low and you may retire with a higher tax bracket?


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## atrp2biz (Sep 22, 2010)

Yes, I'm assuming.

If the OP has contributed to an RRSP....geesh.

Furthermore, 

1. Gambit/DLR to acquire USD
2. Look at earnings retention ratio to gauge earnings growth vs. dividend payouts
3. Buy low, sell high
4. Look both ways before crossing the street.


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## Cal (Jun 17, 2009)

Jungle said:


> What if your current tax bracket is low and you may retire with a higher tax bracket?


I would still try to keep as much of the US content in the RRSP to avoid US with-holding taxes on your dividends.


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## atrp2biz (Sep 22, 2010)

You can also defer claiming the contribution.


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## Belguy (May 24, 2010)

Pick up a copy of the current MoneySense magazine and check out Norm Rothery's stock picks. He has a good track record.


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## KaeJS (Sep 28, 2010)

As Argonaut has said, you may want to refer to his post in another thread:



Argonaut said:


> You need yourself a pipeline. ENB, TRP, IPL.UN
> You need yourself a telecom. T, BCE
> You need yourself a utility. FTS, EMA, CU
> You need yourself a real estate. REI.UN, REF.UN
> ...


He has a pretty good list there, except there are no financial stocks. Add in a MFC, SLF, BMO, TD, BNS, GWO, and you should be good to go...


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## joncnca (Jul 12, 2009)

Argonaut said:


> I listed my portfolio of outperforming dividend stocks in one of your other many threads. Despite my minimal expertise, the list was worth at least twice what you paid me for it. I won't list it again. It sounds like you may need a financial advisor, or at least devote some time to researching for yourself.


yes, i looked into those, thanks =)

as i recall, IPL.UN/REI.UN/CNR/T/FTS, and fractional shares of TD.

this is all you hold, and this is sufficiently diversified??

i see the quote by KaeJS for something you had written, that's more selection...so you hold all of those (i.e. 2-3 in each of those sectors). what about sectors other than the ones listed, or the ones represented by those 6 securities above?


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## doctrine (Sep 30, 2011)

You shouldn't add a REIT if it's a non-registered account. You will be taxed at your full marginal rate, vice receiving a dividend tax credit for eligible dividends from every other company on that list. You could try FCR or BPO for a real estate corporation.


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## Abha (Jun 26, 2011)

I would split KaeJS's financials into two groups. Insurance & Financials.

I wouldn't lump all of them together as they are two separate beasts.

That being said, his picks in those industries are the right plays for CDN dividend stocks.


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## Argonaut (Dec 7, 2010)

joncnca said:


> yes, i looked into those, thanks =)
> 
> as i recall, IPL.UN/REI.UN/CNR/T/FTS, and fractional shares of TD.
> 
> ...


Nope that's it, that's all I hold for stocks (besides a Brazilian one). My portfolio is small, but I like it focused anyways. When my portfolio is large I don't expect to have much more than 10 stocks. You'll have to find what works for you!


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## KaeJS (Sep 28, 2010)

Abha said:


> I would split KaeJS's financials into two groups. Insurance & Financials.
> 
> I wouldn't lump all of them together as they are two separate beasts.


This is true. I agree. 

MFC, SLF and GWO will not react the same as BMO, TD, and BNS would. 

I apologise for added confusion.


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## cardhu (May 26, 2009)

Jungle said:


> What if your current tax bracket is low and you may retire with a higher tax bracket?


You can’t determine the efficacy of an RRSP by which tax bracket you end up in during retirement ... it is measured by comparative tax rates, and it is no great challenge to end up in a higher tax bracket yet face a lower tax rate on RRSP/RRIF withdrawals. Doesn’t happen in all cases, but it is well within the realm of possibility for a lot of people ... furthermore, even if you do end up facing a higher tax rate on your withdrawals, it would have to be significantly higher to end up worse than TFSA, and higher still to end up worse than a taxable account. 

An RRSP is usually the best place to hold US dividend payers, but if, after a proper and valid assessment, you conclude that the RRSP isn’t going to work for you, then the TFSA is the next best choice. Obviously, a taxable account is the worst type of account in which to hold US or other foreign dividend payers.


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## HaroldCrump (Jun 10, 2009)

cardhu said:


> it is no great challenge to end up in a higher tax bracket yet face a lower tax rate on RRSP/RRIF withdrawals.


Can you explain this part, please?
Don't the RRSP withdrawls get treated like regular employment income and thus attact the highest rate?


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## Four Pillars (Apr 5, 2009)

HaroldCrump said:


> Can you explain this part, please?
> Don't the RRSP withdrawls get treated like regular employment income and thus attact the highest rate?


I think he's talking about the fact that RRSP contributions are typically made at your highest (or higher) marginal tax rates, whereas withdrawals can have a lower average tax rate, even if the top marginal tax rate of your RRSP withdrawal is higher than the original deferred tax rate.

For example, let's say someone builds up their RRSP using contributions that defer tax at a 35% rate. They retire and get OAS, CPP plus any withdrawals from their RRSP/RRIF.

The tax paid on RRSP withdrawals from $15k (OAS + CPP) amount to about $40k will only be about 20%. If you keep increasing the RRSP withdrawal, you will get into higher and higher tax rates.

As long as the AVERAGE tax rate paid on the RRSP withdrawal is lower than the average tax deferred on the contributions, then you have saved some taxes, even though the marginal tax rate on the last RRSP $ withdrawn is higher than average tax rate deferred.


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## doctrine (Sep 30, 2011)

You are going to save money in an RRSP even if your tax bracket is exactly the same. The reason is you do not pay capital gains or tax on interest/dividends. 

If your tax bracket upon withdrawal is lower, you will save even more money.

A common mistake when assessing RRSPs is that you must be in a lower bracket. Not at all.


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## Soils4Peace (Mar 14, 2010)

Jungle said:


> What if your current tax bracket is low and you may retire with a higher tax bracket?


Max your tfsa first. If you want US exposure consider a NASDAQ ETF, which provides diversification, but has less dividends and more expected capital gains. If you really must have US dividend stocks or ETFs put them in an RRSP.


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## sensfan15 (Jul 13, 2011)

I have been sitting on cash the past while looking to add either ENB, FTS, TRP, CU, CNR or BCE. These stocks have all done very well despite the economic mess the world is in. I want to get them cheaper. They are all close to their 52 week highs. I hope Europe continues to spiral out of control.


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## Argonaut (Dec 7, 2010)

That's a very good list. Pick one from each sector. Your favourite out of ENB or TRP, FTS or CU, etc. Portfolio concentration, like the orange juice. Get aggressively defensive, as I like to think of it. Apply maximum force at the decisive point, as per Jomini. Some say investing is like an art form, but I think of it as a battlefield. 

"Victorious warriors win first and then go to war, while defeated warriors go to war first and then seek to win." -Sun Tzu


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## Maybe Later (Feb 19, 2011)

Four Pillars said:


> As long as the AVERAGE tax rate paid on the RRSP withdrawal is lower than the average tax deferred on the contributions, then you have saved some taxes, even though the marginal tax rate on the last RRSP $ withdrawn is higher than average tax rate deferred.


This is an excellent explanation that should be brought up in every TFSA vs. RRSP thread. Annual contributions are made at your marginal rate, but when you take $$ out of your RRSP you have the cushion of the progressive tax rates. In most cases you need to significantly exceed your working income in retirement to end up with an average tax rate on the withdrawal that equals the marginal rate that contributions benefitted from.


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## rassmy (May 7, 2010)

Since the poster is asking for a small portfolio, i would diversify among 5 stocks 
BNS, BCE, FTS, PWF, ENB


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## sensfan15 (Jul 13, 2011)

The stocks I want to buy have not been hit hard at all unfortunately. Although with Obama delaying the Keystone XL decision, TRP might dip in the next while. T, ENB, FTS are very close to 52 week highs.


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## Four Pillars (Apr 5, 2009)

Maybe Later said:


> *This is an excellent explanation *that should be brought up in every TFSA vs. RRSP thread. Annual contributions are made at your marginal rate, but when you take $$ out of your RRSP you have the cushion of the progressive tax rates. In most cases you need to significantly exceed your working income in retirement to end up with an average tax rate on the withdrawal that equals the marginal rate that contributions benefitted from.


Thank you!


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## peterk (May 16, 2010)

^ That is an excellent point that I think I may have not taken into account when doing those retirement projections.


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## cardhu (May 26, 2009)

Harold said:


> Can you explain this part, please?
> Don't the RRSP withdrawls get treated like regular employment income and thus attact the highest rate?


Yes, RRSP withdrawals are treated as ordinary income, and as with regular employment income, the tax attributable to those withdrawals depends on your circumstances. The key distinction for RRSP, is that contributions made during your working years are marginal to your income, while withdrawals taken during your retirement years ARE your income … therefore, your marginal rate is the applicable tax rate at contribution but at withdrawal it isn’t. 

As FP described, an RRSP withdrawal may pass through several brackets, resulting in an averaging of different bracket rates. That’s part of the answer, but there’s more to it than that. Deductions and tax credits are part of the income tax formula and may reduce the tax owing. Pension income credit, medical expense credits, charitable contribution credits, etc. etc., all of which are viable credits that a senior person might conceivably be eligible for, serve to reduce tax owing. At the end of the day, the key figure is the amount of tax actually owing to CRA for the year’s income, and you cannot reasonably allocate more than ALL of that amount to RRSP withdrawals. And yet, that is precisely what the marginal rate/tax bracket argument often does. 

An ON resident in the lowest tax bracket would get somewhere in the range of 20% to 26% tax break on RRSP contributions, and possibly another 2% to 7% in clawforwards, so potentially an effective rate at contribution of as high as 32%. More if they have kids. Even if they retire into the next bracket up, they could face tax rates on withdrawal of well below 20%. 

A higher income in retirement is not necessarily an RRSP-killer. For most people, it would have to be a LOT higher, before the tax rate on withdrawal exceeded the tax rate on contribution, and even higher still before a compelling case could be made to avoid the RRSP altogether … (or to hold US dividend payers in TFSA instead of RRSP, which was the origin of this tangent).


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## HaroldCrump (Jun 10, 2009)

cardhu said:


> The key distinction for RRSP, is that contributions made during your working years are marginal to your income, while withdrawals taken during your retirement years ARE your income … therefore, your marginal rate is the applicable tax rate at contribution but at withdrawal it isn’t.
> 
> As FP described, an RRSP withdrawal may pass through several brackets, resulting in an averaging of different bracket rates.


I see what you guys meant.
Marginal rate saved at contribution, average rate applied at withdrawal.
Thanks for the explanation.


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## jcgd (Oct 30, 2011)

Just to make sure I'm understanding it correctly, is my entire tax refund while I'm working based off the tax bracket I'm in?

For example, if I am in a 36% tax bracket by $7000 (meaning I make seven grand more than the lower bracket allows) and my contribution for the year is $10000 is the entire refund $10000x36% or is it $7000x36% + $3000x 32%?


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## doctrine (Sep 30, 2011)

the latter ^^


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## jcgd (Oct 30, 2011)

Cool, thanks.


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## Belguy (May 24, 2010)

From the Globe and Mail, an article on investing in U.S. dividend payers:

http://www.theglobeandmail.com/glob...-leap-into-us-dividend-stocks/article2237161/

Any thoughts?


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## gibor365 (Apr 1, 2011)

Belguy said:


> From the Globe and Mail, an article on investing in U.S. dividend payers:
> 
> http://www.theglobeandmail.com/glob...-leap-into-us-dividend-stocks/article2237161/
> 
> Any thoughts?


All those things are well known.... Keep US dividend stocks in RRSP or LIRA or RIF/LIF and you won't pay any taxes. 

Belguy, take a look at www.seekingalpha.com and select income section... a lot of great article over there include form founder Dividend chanpions/contenders list David Fish


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## gibor365 (Apr 1, 2011)

Jusr read article "11 Dividend Stocks With More Than 50 Years Of Increases"



http://seekingalpha.com/article/308...f-increases?ifp=0&source=email_authors_alerts

This is the list: AWR, CINF, DBD, DOV, EMR, GPC, MMM, NWN, PG, PH, VVC

I hold several dividend champions , but nothing from this list ....


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## KaeJS (Sep 28, 2010)

^ I like MMM and PG. I've actually been looking at MMM since it dropped out of the 90's. I have no money to purchase it, but I would buy under $80.

I don't know enough about the rest to really make a decision on them.

I don't own any, either.


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## gibor365 (Apr 1, 2011)

KaeJS said:


> ^ I like MMM and PG. I've actually been looking at MMM since it dropped out of the 90's. I have no money to purchase it, but I would buy under $80.
> 
> I don't know enough about the rest to really make a decision on them.
> 
> I don't own any, either.


I also like PG amd MMM, also like CINF from this list. Almost bought PG, but my order didn't get executed.
The closest one from my holding approaching 50 year growth mark is JNJ (49 years).

I think everyone know , but below are great sources to research dividend stocks:
http://dripinvesting.org/Tools/Tools.asp
http://www.tessellation.com/dividends/streaks.html

As per second link, JNJ and WMT only 2 stocks that increased annually dividends for at least 25 years with growth rate at least 7%

BTW, too bad there is no such resources for canadian stocks


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## Homerhomer (Oct 18, 2010)

KaeJS said:


> . I've actually been looking at MMM since it dropped out of the 90's. I have no money to purchase it, but I would buy under $80.
> 
> .


I personally think that 3M is a dog of large industrials, it has shown very little growth in the last ten years and despite this the valuations are just as high (at least p/e) as the comparable stellar companies like CAT, DE, UT or even a dividend champion ITW.

Dividend yield is no better than the other companies, and despite missing earnings while the other once excelled it's no cheaper than them.


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## KaeJS (Sep 28, 2010)

Homerhomer said:


> it has shown very little growth in the last ten years and despite this the valuations are just as high (at least p/e) ]


I don't disagree with this.


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## Sampson (Apr 3, 2009)

Homerhomer said:


> I personally think that 3M is a dog of large industrials, it has shown very little growth in the last ten years...


3M - 10 years

2002 
EPS:$2.53
Revenue:$16.3B
Net Income:$2B
Dividend:$1.24/share

2011 (projected)
EPS:$6.07
Revenue:$29.2B
Net Income:$4.3B
Dividend:$2.2/share

The stock price may not have moved as much as some of the other companies you list, but I would never describe 3M as a company that has shown little growth over 10 years. Even the share price when compared to the S&P500 is doing very well.


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## Homerhomer (Oct 18, 2010)

Sampson said:


> The stock price may not have moved as much as some of the other companies you list, but I would never describe 3M as a company that has shown little growth over 10 years. Even the share price when compared to the S&P500 is doing very well.


I just look at it differently, there is a pool of companies in the same sector that perform at different levels, have better or equal valuations, and have met or exceeded expectations more often than not, of the bunch 3M seems like the weakest and I would rather invest in the leader of the pack. If the weakest of the bunch had by far the most enticing valuations, prospects, dividends and so I may consider it, but it's not the case.


In comparison to S&P 3M indeed performed better, but S&B is flat, made no money in ten years, in reality it means it has lost money for everyone who bought into it 10 years ago taking in consideration inflation which is somewhat offset by dividends. 3M share price is up about 40%, or 4% per year, not much better than GIC, in my books this is very little growth taking into consideration that this equity investment bearing risks as oppose to guaranteed term investment.

DE for example is cheaper, grew 250% in the same time period, market cap is about half a size of 3M, ITW has grown only slightly more in the last decade but has better dividends, is about third of 3M size and has cheaper valuations. CAT is as stellar company with cheaper valuations and better growth prospects, I don't see one reason why I would want to own 3M instead of any of the once I have mentioned.


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## gibor365 (Apr 1, 2011)

I'm thinking about buying PG or JNJ on NYSE and FTS on TSX. What is in your opinion good entry price for those?


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## gibor365 (Apr 1, 2011)

Homerhomer said:


> DE for example is cheaper, grew 250% in the same time period, market cap is about half a size of 3M, ITW has grown only slightly more in the last decade but has better dividends, is about third of 3M size and has cheaper valuations. CAT is as stellar company with cheaper valuations and better growth prospects, I don't see one reason why I would want to own 3M instead of any of the once I have mentioned.


and what is your opinion on DOV ?


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## Homerhomer (Oct 18, 2010)

gibor said:


> and what is your opinion on DOV ?


Don't have one, sorry, but I will read about it and will get back to it.


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## gibor365 (Apr 1, 2011)

Btw, DE has earning on wed....is anyone playing?


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## Homerhomer (Oct 18, 2010)

gibor said:


> Btw, DE has earning on wed....is anyone playing?


Not me, whenever I try to play earnings I get burned so I stay away.

Couple of observations on DE, it doesn't have a very clear trading range but $74 seems to be toward the top of it, I would be interested to buy it at $65 or below, if you look at the chart from about July on the highs seem to be lower each time, you can draw pretty much straight line for it, and the stock trades pretty much along S&P, but swings are much stronger.

IMO this is a great company but if S&P goes down 20%, this may go down 40%, if you buy it lower and get stuck the dividend will be a bit higher so the pain will not be as bad ;-)


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