# Dividend Yield - What is the minimum stock dividend yield that you will accept?



## avrex (Nov 14, 2010)

Assumption: You're searching for Canadian dividend stocks to place in your non-registered account to take advantage of the dividend tax credit. You already have several non-dividend 'growth' type stocks in your overall portfolio.


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## andrewf (Mar 1, 2010)

Total return after tax is what matters.


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## Square Root (Jan 30, 2010)

andrewf said:


> Total return after tax is what matters.


Of course. But some investors only invest in dividend paying stocks. In my case, being retired, divs are an important source of cash flow and I happen to believe that over time div paying co's also offer the prospect of good total returns. Being able to live on cash flow from dividends reduces my need to trade and removes the risk that I will liquidate a position at a bad time and thus makes it easier to be a DIY investor without paying MER's or ETF fees. Also, my total returns have been comparable or slightly better than appropriate benchmarks. My lowest current yield is Enbridge.


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## kcowan (Jul 1, 2010)

I like 3.5% as a minimum.


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## gibor365 (Apr 1, 2011)

If I buy stock pure for dividend income, i buy with yield at least 3% , for example i was waiting and bought MCD only when yield became 3%+... the same apply to other dividend stocks I own like ABT, JNJ, PEP....
Within stock I bought for dividends the lowest yield I think has MCD , and the highest EGL.UN with 10-11%. 
Exception PSX that I got when COP spinned off


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## KaeJS (Sep 28, 2010)

kcowan said:


> I like 3.5% as a minimum.


^This.

Ideally, 4% or higher. But I would settle for 3.5% as a minimum.


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## gibor365 (Apr 1, 2011)

KaeJS said:


> ^This.
> 
> Ideally, 4% or higher. But I would settle for 3.5% as a minimum.


KaeJS, did you become dividend investor?!

I doubt that "the best of the breed" like MCD you can buy for 4% or higher....however taking in consideration that they increase div every year by double-digits, most likely you'll get yield on original investmet more than 4% pretty soon


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## andrewf (Mar 1, 2010)

This seems pretty arbitrary. Why does the yield matter? As a proxy for valuation (companies with really high P/Es will tend to have low dividend yields)? Whether the company uses its cash flow to issue dividends, buy back shares or reinvest seems to not quite hit the mark in terms of what matters about a company.


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## CanadianCapitalist (Mar 31, 2009)

I completely understand retirees owning high-yielding investments to fund their expenses. It beats me why investors who presumably have a paycheck and are not going to tap into their portfolios for decades want to own high-yielding investments especially in taxable accounts. Even if you account for the favourable tax treatment accorded to eligible Canadian dividends, paying ongoing taxes will be a drag on investment returns.


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## Beaver101 (Nov 14, 2011)

Higher yields to me mean the company is "thinking" about their shareholders.


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## gibor365 (Apr 1, 2011)

CanadianCapitalist said:


> Even if you account for the favourable tax treatment accorded to eligible Canadian dividends, paying ongoing taxes will be a drag on investment returns.


 Myself and my wife have enough room in registered accounts (we have max available room every year) and TFSA, so we're not bothering even to open Cash in discount brokarage and keep cash in HISA securely getting 1.35-2% and this Cash portion is about 30-40% of our assets.


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## gibor365 (Apr 1, 2011)

Beaver101 said:


> Higher yields to me mean the company is "thinking" about their shareholders.


I'd say not higher yields, but consistenly increasing dividends.


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## HaroldCrump (Jun 10, 2009)

Beaver101 said:


> Higher yields to me mean the company is "thinking" about their shareholders.


Most certainly not.
It means the market is demanding a higher yield for higher perceived risk.
Yield says nothing about whether a company cares about shareholder value or not.

At the very least, you should pay attention to the payout ratio.
A high yield coupled with a high payout ratio is a clear sign of danger.
A high yield coupled with a low payout ratio is a better sign, and might indicate temporary poor condition of the stock.
A low yield coupled with a high payout ratio is bad too.
A low yield and low payout ratio means the company re-invests most of its earnings.

These are _very_ general guidelines, and not a stock valuation strategy by any means.


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## jcgd (Oct 30, 2011)

Beaver101 said:


> Higher yields to me mean the company is "thinking" about their shareholders.


To me they mean "here... we think you can get more out of this than we can". I believe a company should only pay out what it can't reinvest or will simply just sit on. Like Apple's cash hoard. Give me my money. But if they are using it all to make me more money next year, so be it.

*And after reading Harold's post above, I agree with him as well. No point in paying a 6.5% yield when the company is paying out 123% of earnings. That's not going to last very long.


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## Beaver101 (Nov 14, 2011)

jcgd said:


> To me they mean "here... we think you can get more out of this than we can". I believe a company should only pay out what it can't reinvest or will simply just sit on. Like Apple's cash hoard. Give me my money. *But if they are using it all to make me more money next year, so be it.**And after reading Harold's post above, I agree with him as well. No point in paying a 6.5% yield when the company is paying out 123% of earnings. That's not going to last very long.


 ... or maybe buy a bigger corporate jet? Higher yields to me also mean the the shareholders are "thinking" about the company, work both ways. :biggrin:


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## jcgd (Oct 30, 2011)

Buying a corporate jet wouldn't be making me more money. What do you mean the shareholders are "thinking" about the company?


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## Beaver101 (Nov 14, 2011)

How about buying a NHL franchise to somehow make more money? Shareholders "think" about the company based on Harold's post. Company "think" of shareholders only if they're going to stay or dump their stocks. No love there. :biggrin:


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## gibor365 (Apr 1, 2011)

I think he means that paying dividends to shareholders in forms of dividends is better than spending cash on new corporate jets....or hockey teams 
Sure you should look at payout ratio, but it's not always justified... some good companies can have bad earnings because of the 1 time events, like T.N losses with purchase of T-Mobile or JNJ grugs recall...
Stock are like bond, junk bonds have higher yield than government bonds, because they are more risky... same with equities, I know that holding EGL.UN with 11% yield is much more risky than MCD with 3.2% yield, but I hold both. 
P.S. This is why I like many Canadian banks, perfect payout ratio, P/E.... and close to 5% yield


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## Beaver101 (Nov 14, 2011)

So gibor, are you content with a 5% yield? Just for curiosity.


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## gibor365 (Apr 1, 2011)

All depends on the equity. If it's solid blue-chip with long history of increasing dividends - yes.
If more risky stock, like I gave example EGL.UN - 5% is not enough and if I'd like exposure to oil, I'd just add more COP.N or HSE.
What about you?
P.S. I invest not only into dividend stocks, I hold some equities that don't pay or pay very little dividends like PALL or SU


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## Sampson (Apr 3, 2009)

andrewf said:


> Total return after tax is what matters.


This.

Would you rather own something that pays 7% annually for the past ten years, or own AAPL over that same time? Yield is only relevant as a means of capitalizing growth in your portfolio - i.e. retirees.

One could make a case for the preferential tax treatment, but unharvested capital gains trigger no tax at all.


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## jcgd (Oct 30, 2011)

My favourite is yield on cost. What a ridiculous metric. As if I'm going to tell you what my portfolio return was this year based on the value of it five years ago when I put the money in my account.


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## gibor365 (Apr 1, 2011)

Sampson said:


> This.
> 
> Would you rather own something that pays 7% annually for the past ten years, or own AAPL over that same time? Yield is only relevant as a means of capitalizing growth in your portfolio - i.e. retirees.
> 
> One could make a case for the preferential tax treatment, but unharvested capital gains trigger no tax at all.


 Nice comparison with AAPL, but why not RIM fro example


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## My Own Advisor (Sep 24, 2012)

I will accept 1.5% as the floor, with a larger capital appreciation than that. I love dividends but other folks have already said it, total return matters.


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## gibor365 (Apr 1, 2011)

My Own Advisor said:


> I will accept 1.5% as the floor, with a larger capital appreciation than that. I love dividends but other folks have already said it, total return matters.


Than you should buy ... AAPL...Now 

Seriously, dividends and total return usually go together, except AAPL and PALL, my top 10 performing stocks are solid dividend blue-chips: PM, ABT, T, MO, BCE, RCI.B and REITs.


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## My Own Advisor (Sep 24, 2012)

Really though, how much higher can AAPL go?


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## jcgd (Oct 30, 2011)

Hypothetically speaking, say growth completely halted with Apple, but earnings were consistent. How far could it drop?


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## Beaver101 (Nov 14, 2011)

gibor said:


> All depends on the equity. If it's solid blue-chip with long history of increasing dividends - yes.
> *If more risky stock, like I gave example EGL.UN - 5% is not enough *and if I'd like exposure to oil, I'd just add more COP.N or HSE.
> What about you?
> P.S. I invest not only into dividend stocks, I hold some equities that don't pay or pay very little dividends like PALL or SU


 ... same here, for higher yeilds I'm willing to take more risk eg. small-cap company RSI yielding 5.5% presently but was 6.5% when first bought in 2011, also can't see sugar disappearing anytime soon. I also hold POT (large cap which is as safe as it gets and yields next to nothing) but has capital appreciation and trading potential. Cheers for yields while it last!


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## Cal (Jun 17, 2009)

gibor said:


> I'd say not higher yields, but consistenly increasing dividends.


Same. I love to get a raise for doing nothing.

The floor for my yield really depends on the company and sector. I can't really pin down a % minimum personally. Why would I avoid a great company like KO if their dividend doesn't meet the 3% threshold, or MCD or ENB if I were to choose a 4% minimum.

And on the other hand look at all of the YLO shareholders....


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## gibor365 (Apr 1, 2011)

Cal said:


> Same. I love to get a raise for doing nothing.
> 
> The floor for my yield really depends on the company and sector. I can't really pin down a % minimum personally. Why would I avoid a great company like KO if their dividend doesn't meet the 3% threshold, or MCD or ENB if I were to choose a 4% minimum.
> 
> And on the other hand look at all of the YLO shareholders....


Agree to some degree, but I prefered FTS over ENB, PEP over KO and 1 of the reasons were higher yield of FTS and PEP.

_Really though, how much higher can AAPL go? _ as an example S&P 12month target is $800. AAPL has P/E ratio just 15, so they still have good growth potential and ability to raise dividends


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## Jeremyhalifax88 (Sep 11, 2012)




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## gibor365 (Apr 1, 2011)

You are funny!!! 2 days ago you were a little down on your portfolio and said that you're selling everythink and going into Cash, today you are up a little bit and want to be long-term investor!
btw, all of your holding (except LLL) are paying dividends. 
Regarding dividends and definitions better read some books or at least wikipedia


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## Young&Ambitious (Aug 11, 2010)

Jeremyhalifax88 said:


> I'm trying to become a long-term investor
> 
> What are dividend and could they be beneficial?


I think I may have mentioned this before, there's a sticky thread titled "Eight With Weight" or must read book list etcetc. This will bring you up to speed on all of those things.


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## Square Root (Jan 30, 2010)

CanadianCapitalist said:


> I completely understand retirees owning high-yielding investments to fund their expenses. It beats me why investors who presumably have a paycheck and are not going to tap into their portfolios for decades want to own high-yielding investments especially in taxable accounts. Even if you account for the favourable tax treatment accorded to eligible Canadian dividends, paying ongoing taxes will be a drag on investment returns.


Agree that you might not want to reach for particularly high yields in taxable accounts prior to retirement. On the other hand some co's, like the banks, have had superb total returns over decades while paying and growing their divs. Drips can work to your benefit although taxes will be an issue. No more of an issue than buying non eligible div payors in a taxable account though.


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