# Dividend investing



## gibor365 (Apr 1, 2011)

David Fish, founder of Dividend Champions/Contenders/Challengers rankings, enhanced his spreaadsheet with some new data like new _Confidence Factor creates a “score” based on numerous data items, such as Dividend Growth Rates, Payout Ratio, Price/Earnings ratio, etc. The idea is to gauge the likelihood that dividend increases will continue and that they will do so with as much robustness as they have in the past._

Also he publishes interesting dividend smackdowns...the last one 

http://seekingalpha.com/article/317533-dividend-champions-smackdown-xxii


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## Argonaut (Dec 7, 2010)

McDonalds is of course the very best stock in the United States. I would like to buy it at 3%+ yield though. Procter & Gamble I maybe wouldn't buy myself but would recommend to conservative investors; ditto with Emerson. Some familiar names there when lists like this come up, but I don't like the capital gain probabilities in a lot of these stocks.


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## gibor365 (Apr 1, 2011)

Argonaut said:


> McDonalds is of course the very best stock in the United States. I would like to buy it at 3%+ yield though. Procter & Gamble I maybe wouldn't buy myself but would recommend to conservative investors; ditto with Emerson. Some familiar names there when lists like this come up, but I don't like the capital gain probabilities in a lot of these stocks.


I'm personally holding only ABT and PG from this list... I'd buy MCD when their dividends 3% or higher

Another interesting article: 7 Low-Beta Dividend Stocks Retirees Should Own In 2012
http://seekingalpha.com/article/317123-7-low-beta-dividend-stocks-retirees-should-own-in-2012

I'm long T, MO, JNJ


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## Spudd (Oct 11, 2011)

I own MCD and PG from that list. I bought MCD in August on a new 52-week high and it just keeps going up. I actually want to sell it because I bought it in my unregistered account and I'd rather hold Canadian stocks there, but I can't do it while it's still going up. 

PG's stock price hasn't changed for years it feels like, but I buy that through my employee purchase plan so I make an immediate 50% profit on all of it. 

Disclaimer: None of the opinions here are the opinions of P&G, they are mine alone.


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## Homerhomer (Oct 18, 2010)

On seekingalpha there are few contributors, David Fish being one of them, who share their opinions and research and I find them to be good starting points in further research into some of the companies they mention.

The list is quite familiar to me, was lucky to buy MCD and ABT close to the lows for the year, have few others on my watchlist but they have never came down low enough for me to be interested in them, I guess the companies I wouldn't touch are walgreen and aflac, and that's mostly because of the industries they are in.

I think the capital appreciation for these companies can be pretty good ( for me good means 10% combined average annual dividend income/capital appreciation) however it means buying the right companies at the right time, that's why for me the crucial metrics are p/e, peg, payout ratios and so on.

I wouldn't be buying any of these companies at the current levels, MCD I bought at $74 and was hoping for 7% capital appreciation per year, after such a run up one has to expect price consolidation and even a pull back which may present buying opportunities, and if market sentiment drastically improves mcd shares may not appreciate a whole lot in the near to mid term.

In the meantime I will be happy to collect the dividends and write covered calls and be content that I am holding one of the most stable companies on the planet, hopefully this will continue for a long time.


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## gibor365 (Apr 1, 2011)

_I wouldn't be buying any of these companies at the current levels,_
This is the problem for me now, as I want to deploy new TFSA/RRSP contributions plus I have cash from selling (also involuntary  - DAY) some stocks at YE...
I was able to buy ABT, JNJ, PM and some others at relatively low prices during 2011, now they're too expensive... if tobacco will retreat more, maybe I'll add positions to MO/PM....
from the list I like WM, was following it for several months...


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## gibor365 (Apr 1, 2011)

I like this article :
The Ideal Dividend Portfolio In 3 Investments. 

http://seekingalpha.com/article/316763-the-ideal-dividend-portfolio-in-3-investments

What do you think?


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## londoncalling (Sep 17, 2011)

In light of the fact that I think this board has too many threads for similar topics I thought I would post this question here... How many of you here consider yourself primarily a dividend investor?

I know that there are lots of people here that are traders, and many more that are traders that have long term positions, do options etc. I would consider myself a dividend investor. I have never held a stock that didn't pay a dividend even if it is a small one.

What got me thinking about this question was more about demographics and stage of investment cycles. My understanding from looking at this and other forums is that most dividend investors are in a later stage if their investment cycle (already retired, nearing retirement in the next 5-10 years, or have accumulated a large amount of capital).

I consider myself to be of a moderate risk tolerance and like the idea of getting income for investing on a regular basis through dividends and distributions. I don't DRIP for a couple reasons. I like to determine when I buy stocks and I feel it forces me to keep a closer eye on my holdings. I have as least 25 - 30 years before I want/will be able to retire maybe longer if I still like working. The one thing I don't like about dividend investing as that as of late people have been seeking returns through yielding stocks which has driven up the price of these stocks. IMO, at some point the market will recover and people will go back to growth stocks. 

Of those of you that have a large holding of dividend stocks, I ask, what phase of your investment cycle are you in? Why have you chosen to be primarily a dividend investor? For those of you that don't consider yourselves a dividend investor what has pushed you away from this style of investing?

Thanks in advance...

Cheers


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## gibor365 (Apr 1, 2011)

I would consider myself 50% dividend investor  another 30-35% index investor and rest speculative holdings , that some I trade in matter of days/weeks, some like XMA or PALL hold for long term....
Agree that on this forum young guys/gals more involved in trading, even though there are a lot of blogs where young ppl invest only in dividend stocks....
BTW, if I can I DRIP, first of all some stock give you discount up to 5% on DRIPs, in some account (mine and my wife's LIRA, and TFSAs), I cannot add new money at all or during the year, I don't want small portion of chas sitting around.
Other reason , I like to DRIP because when equityis up , I buy less shares, when is down, I buy more shares


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## gibor365 (Apr 1, 2011)

I read lately that many dividends oriented investors buying dividend ETF , for example CDZ - S&P/TSX Canadian Dividend Aristocrats Index .
So, I wanted to compare what is better , to buy CDZ or to build your own ETF (lets call it mini-ETF).
I checked all 63 CDZ holdings and excluded stocks with payout more than 100%, P/E more than 20 and yield less than 2%. So, I got 28 stocks in mini-ETF (btw, if disregard yield requirement it's coming to 39 holdings).
Mini-ETF got better yield 3.44% vs CDZ 3.3% and for initial buys I'd spend only $194.6 . It's pretty good considering that for CDZ I'd pay in MER 0.67% every year.
Obviously mini-ETF doesn't make sense with small portfolio, but for example 140K (5K x 28 holdings) - mini-ETF is quite reasonable.
You will be avoiding paying $938 annual MER (for 10 years holdings it's coming to huge amount of $9.380!
Mini-ETF gives you more flexibility as you can, for example, on quaterly basis check basic fundamental and sell holding that doesn't pass it, same if one of the holdings is cutting dividend....
I want to track performance of such mini-ETF and compare to CDZ.
Just wanted to hear what you think about this? Just please don't start with slogans like "dividends are not important and so on" 
P.S. List of holdings: ENF
BDT
NPR.U
IGM
TRI
LB
SJR.B
CJR.B
CGX
EMA
TD
BNS
FTS
RCI.B
T
DII.B
ET
IFC
SC
ESI
CCA
CU
CWB
THI
FTT
CTC.A
MDI
CAE

P.P.S. I'm long: TRI, TD, BNS, FTS, RCI.B,


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## Echo (Apr 1, 2011)

I had a conversation with Dan Bortolotti a few months ago about tracking returns and comparing to appropriate benchmarks. My portfolio returns since mid-09 were 17% per year while CDZ returned 13% per year over the same period.

Here was Dan's feedback:

"As for whether CDZ would be an appropriate benchmark, I would say yes. The way I look at it, both you and this ETF favour a dividend growth strategy, so the key difference is how that strategy is implemented. CDZ imposes a number of quantitative rules and then makes all of its “decisions” according to those rules—there is no manager judgment involved. Presumably your strategy uses similar criteria, but it’s not imposed so methodically: there is some judgment on your part. So by comparing your picks to the ETF, you are measuring the quality of that judgment. In other words, does it add or subtract value? Would you have been better off simply using the index to make all the decisions for you? 

Of course, no benchmark is ever perfect. Your portfolio is fairly heavy in banks, whereas CDZ has minimal exposure to banks, so that helps to explain at least some of the difference between the two portfolios since 2009. (I have not looked closely at CDZ’s holdings to see how many stocks you have in common.) But it’s probably as good a benchmark as any other you might use."


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## My Own Advisor (Sep 24, 2012)

I think that is good feedback from Dan.


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## none (Jan 15, 2013)

It is good feedback but one must always keep in mind that past performance is not indicative of future returns.


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## blin10 (Jun 27, 2011)

gibor, what site do you use to screen for payout ratio ?


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## Belguy (May 24, 2010)

Wasn't there something in today's federal budget to make dividend investing more attractive?

Might this be an argument for investing in dividend ETF's instead of the broader based ETF's?


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## CanadianCapitalist (Mar 31, 2009)

Belguy said:


> Wasn't there something in today's federal budget to make dividend investing more attractive?


No there wasn't.


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## gibor365 (Apr 1, 2011)

blin10 said:


> gibor, what site do you use to screen for payout ratio ?


tdw


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## Belguy (May 24, 2010)

CanadianCapitalist said:


> No there wasn't.


Yes, you are right. I tried to immediately correct my entry but my computer seized up on me. There is something there about dividends but it is not about dividends to individual investors from Canadian corporations.


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## liquidfinance (Jan 28, 2011)

Morningstar and Reuters also provide payout ratio.


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## andrewf (Mar 1, 2010)

First off, dividends don't really matter. 

Second, as long as it's reasonably diversified and you're not trading too much, I think it's likely you'll get the market return less expenses. I'd be shocked if it beat CDZ over 10 - 20 years by much more than the difference in MER.

Then again, CDZ is pretty expensive.


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## lonewolf (Jun 12, 2012)

Londoncalling

I think your onto something regarding demographics. Harry S Dent has had a verry good track record playing the market from the study of demographics. ( I think the cycle of optimism & pessimism not only shows up in stock prices but also in demographics i.e., number of births,

Demographics might have helped push interest rates to thier peak in the early 80s when all the baby boomers borrowed money to purchase homes. Now they are getting past peak spending years & are looking to collect interest.


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## gibor365 (Apr 1, 2011)

andrewf said:


> First off, dividends don't really matter.
> 
> Second, as long as it's reasonably diversified and you're not trading too much, I think it's likely you'll get the market return less expenses. I'd be shocked if it beat CDZ over 10 - 20 years by much more than the difference in MER.
> 
> Then again, CDZ is pretty expensive.


Nobody knows what will be in 20 years , maybe some ATP or TA will beat all indexes  , former USSR leader Nikita Sergeyevich Khrushchev in early 60s said that communism will be biuld in 20 years 
However, potentially mini-ETF has a good chance to outperform CDZ, as overvalued stocks got eliminated as well as stocks with negative earnings and unsustainable dividends (5 biggest CDZ holdings were eliminated for this reason). Also having mini-ETF you will have more reliable stream of dividends...


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## liquidfinance (Jan 28, 2011)

gibor said:


> Nobody knows what will be in 20 years , maybe some ATP or TA will beat all indexes  , former USSR leader Nikita Sergeyevich Khrushchev in early 60s said that communism will be biuld in 20 years
> However, potentially mini-ETF has a good chance to outperform CDZ, as overvalued stocks got eliminated as well as stocks with negative earnings and unsustainable dividends (5 biggest CDZ holdings were eliminated for this reason). Also having mini-ETF you will have more reliable stream of dividends...


The one thing for you to factor in with mini-ETF is the cost to rebalance. Likely you would still be cheaper than paying the ETF fee but what about the cost of time and monitoring the portfolio. 

Then there is always the case that emotion could take over where as you can buy and forget with CDZ.


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## gibor365 (Apr 1, 2011)

liquidfinance said:


> The one thing for you to factor in with mini-ETF is the cost to rebalance. Likely you would still be cheaper than paying the ETF fee but what about the cost of time and monitoring the portfolio.
> 
> Then there is always the case that emotion could take over where as you can buy and forget with CDZ.


It would be the same cost if you're trading holdings 135 times per year (again I'm talking about sample $140 portfolio, bigger portfolio - bigger difference)! And with mini-ETF you can also buy and forget as it holds CDZ best holdings. 
Another things that can be beneficial with ETF DRIPping: - some stocks you may DRIP with discount;
- if price of specific stock going up - you will DRIP less shares and get more Cash and vice versa if stock going down - you DRIP more shares, thus you buying more shares at cheaper prices. With CDZ it always average. For long term and large portfolio $$$ can be significant.


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## blin10 (Jun 27, 2011)

andrewf said:


> *First off, dividends don't really matter. *
> 
> .


if they wouldn't matter then companies wouldn't pay them.


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## gibor365 (Apr 1, 2011)

blin10 said:


> if they wouldn't matter then companies wouldn't pay them.


blin10, I asked on purpose not to discuss here dividends are matters or not


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## andrewf (Mar 1, 2010)

Companies have to return cash to shareholders when they can't profitably reinvest it. There are two ways to return cash: issue dividends or buy back shares. Companies have been tending to do more and more share buybacks and less and less dividend payments as dividends can be tax disadvantaged in some jurisdictions.


So, returning cash to shareholders matters. But dividends are not inherently better than buybacks. Hence my critique of focusing exclusively on dividends. It's failing to look at the whole picture.


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## atrp2biz (Sep 22, 2010)

^ Exactly. Which is why I struggle to find good long-term (20 years) non-dividend paying US stocks. Vast majority of US non-registered investments is in BRK. We are buy and hold to the extreme within our corporations to defer taxes as long as possible.


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## gibor365 (Apr 1, 2011)

atrp2biz said:


> ^ Exactly. Which is why I struggle to find good long-term (20 years) non-dividend paying US stocks.


GOOG, AMZN, eBay, P .... you are welcome to buy.... 

Instead of non-dividend paying US stocks, I'd rather to buy some commodities (at least commodity cannot go "belly up"  ) .... I made money on PALL , lost on DBA .... sold everything except very small position in PPLT as I need dividend stream for retirement ...


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## Toronto.gal (Jan 8, 2010)

gibor said:


> 1. I would consider myself 50% dividend investor
> 2. Other reason , I like to DRIP because when equity is up , I buy less shares, *when is down, I buy more shares*


1. I thought you were 90% dividend investor. 

2. A DCA strategy that has worked relatively well, especially given the volatility [low prices] of some stocks. Also thanks to those low prices, already building larger positions without injecting much new capital.


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## blin10 (Jun 27, 2011)

gibor said:


> blin10, I asked on purpose not to discuss here dividends are matters or not


it's public forum, if anyone wants to say something no need to be a cry baby about it...


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## Toronto.gal (Jan 8, 2010)

blin10 said:


> it's public forum, if anyone wants to say something no need to be a cry baby about it...


Really? Not that long ago, you didn't think the same when I was using this public forum to say something. 

Now, don't be a cry baby!


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## blin10 (Jun 27, 2011)

Toronto.gal said:


> Really? Not that long ago, you didn't think the same when I was using this public forum to say something.
> 
> Now, don't be a cry baby!


it was a little different but you're right, you got me


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## Echo (Apr 1, 2011)

andrewf said:


> Companies have to return cash to shareholders when they can't profitably reinvest it. There are two ways to return cash: issue dividends or buy back shares. Companies have been tending to do more and more share buybacks and less and less dividend payments as dividends can be tax disadvantaged in some jurisdictions.
> 
> 
> So, returning cash to shareholders matters. But dividends are not inherently better than buybacks. Hence my critique of focusing exclusively on dividends. It's failing to look at the whole picture.


So is there a share buyback aristocrat index?


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## andrewf (Mar 1, 2010)

Echo said:


> So is there a share buyback aristocrat index?


http://www.invescopowershares.com/products/overview.aspx?ticker=PKW


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## Argonaut (Dec 7, 2010)

Dividends are so infinitely better than share buybacks, it's not even close. A bird in hand is worth two in the bush.


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## gibor365 (Apr 1, 2011)

Argonaut said:


> Dividends are so infinitely better than share buybacks, it's not even close. A bird in hand is worth two in the bush.


good one


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## andrewf (Mar 1, 2010)

You don't want higher EPS?


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## Sampson (Apr 3, 2009)

Can we make a specific thread about dividends good or not?

No point making every thread and every discussion boil down to this topic. Seems the mode lately.


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## andrewf (Mar 1, 2010)

Do we need to make a new dividend hot stock thread every couple days?


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## liquidfinance (Jan 28, 2011)

andrewf said:


> Do we need to make a new dividend hot stock thread every couple days?


We don't need to make a dividend hot stock thread every couple of days but maybe we do need a thread discussing the merits of dividends vs share buy backs / other methods of returning cash to shareholders. 

This way people can have their say and leave the remaining threads on topic.


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## My Own Advisor (Sep 24, 2012)

I'm with you. There is no really such thing as a hot dividend stock.

andrewf is just playing with us, I think?


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## none (Jan 15, 2013)

Hey Mark quick question for you if you don't mind. I've been putting off buying some of my ETFs simply because I'm a little freaked out and procrastinating about them.

I see for many of the funds that I want the Ex-Dividend Date is this coming Monday. As long as I buy them then I should still get the dividend - is that correct?

Thanks for the help. Congrats on the link from moneysense!


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## liquidfinance (Jan 28, 2011)

none said:


> Hey Mark quick question for you if you don't mind. I've been putting off buying some of my ETFs simply because I'm a little freaked out and procrastinating about them.
> 
> I see for many of the funds that I want the Ex-Dividend Date is this coming Monday. As long as I buy them then I should still get the dividend - is that correct?
> 
> Thanks for the help. Congrats on the link from moneysense!



You needed to buy today to get the dividend.


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## none (Jan 15, 2013)

Drat. Well I guess that's what I get for procrastinating.... thanks.


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## My Own Advisor (Sep 24, 2012)

See above by liquidfinance 

Also:
http://www.myownadvisor.ca/2012/06/in-courting-dividend-stocks-get-know-dates/


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## humble_pie (Jun 7, 2009)

none said:


> Drat. Well I guess that's what I get for procrastinating



none, to mince a fine point, it would normally be better to buy an etf on an X date, not before imho.

unlike stocks, etfs more predictably drop by the amount of a dividend on an X date. So a buyer on this date is going to pay a lower price.

why buy prior to an X date just to collect a dividend that will become less-favourable taxable income in the year of purchase? why not wait, skip the dividend, & buy the etf at a lower price that will generate a most-favourable taxable capital gain but only at some far distant future date?

both etfs & stocks should, theoretically speaking, drop by the amount of any dividend at the opening of trading on the X date. However market forces will immediately sweep in & blur the notional/theoretical dividend drop.

i for one have lost track of the zillions of stocks i've seen where markets opened stronger on the X date & there was no trading drop in the stock price whatsoever. Not even in premarket trading.

however this is less likely to happen quite so rapidly with an etf. It's a bigger ship at full steam in mid-ocean so it's much slower to turn.


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## none (Jan 15, 2013)

That's an interesting point, honestly, I don't fully understand it right now.

If I understand you correctly, you're saying that if for example I buy 100 shares of telus the day before it's ex-dividend data at 70 i will be charged $7000 + commission and be get the dividend of $.64 a share ($64) on April 1st.

Compare the purchase to ON the ex-dividend date. Lets assume the price hasn't changed. What will happen is that I buy it at $70 put after market the price is adjusted to $69.36 but I wouldn't be eligible for the divided. Am I understanding that correctly?

Compare this to the day after the ex-dividend date - then I pay the amount I purchased it for. Is that all correct?

Thanks, this is really interesting.


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## humble_pie (Jun 7, 2009)

none said:


> If I understand you correctly, you're saying that if for example I buy 100 shares of telus the day before it's ex-dividend data at 70 i will be charged $7000 + commission and be get the dividend of $.64 a share ($64) on April 1st.


yes. Notice you have used the words "before its ex-dividend date."




> Compare the purchase to ON the ex-dividend date. Lets assume the price hasn't changed. What will happen is that I buy it at $70 put after market the price is adjusted to $69.36 but I wouldn't be eligible for the divided. Am I understanding that correctly?



no. Think of it this way: "ex" in latin means without, so any party buying a stock on its ex-dividend date is buying a stock without its dividend. There are no "adjustments."

theoretically speaking, the market price of any stock should notionally drop by the amount of the dividend when trading commences on the X date. But reality is extremely different. What i always see are market forces rushing in even before premarket trading. These obliterate any notional adjustment in the share price to reflect the dividend payout. When the specialist or market maker opens up for business in the public exchanges, market forces are already built into the B/As that he's offering.

did that oil pipeline go X this morning but yesterday evening it suffered an ugly leak in the US northwest? Pipe will likely drop by more than the dividend amount. Did that bank go X this morning but the cypriot news is benign & hopeful today? Bank will likely rise.

an etf, on the other hand, is a composite bundle of stocks so it is likely to be less vulnerable to market forces on a minute-by-minute basis. There might be a price-dropping glimmer of an X date opportunity in early trading on the X date, is what i meant.


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## Toronto.gal (Jan 8, 2010)

You receive the dividend when purchased prior to the ex-dividend date, however, on the ex date, the amount would generally be offset by the decrease in the stock price. 

Closing prices of T:

*March 6th:* $71.41 [$71+ throughout the day]
*March 7/2013* was ex-dividend date: $69.70
*March 8th:* $69.77

a) Had you bought 100 shares on the 6th, you would have paid $7,141 [give or take/ + fees], and eligible for the dividend of $64 [$.64 x 100].

b) Had you bought 100 shares on the 7th, you would have paid $6,970 [give or take/+ fees], and would not have been eligible for dividends.

As you can see, under b), you would have paid $107 less**, even without having received any dividends.

Ignoring commissions:

*- Investment total under a)* = $7,141/reduced by dividend of $64 = $7,077
*- Investment total under b)* = $6,970/no dividends

**$7,077 - $6,970 = $107

Had you bought on the 8th, you would have gotten similar results as under b)

Ex-dividend date definition is easy to remember; think in terms of dating, like MOA advises, ie: ex-friend/spouse/boss = without them/without dividends. 

You can take a look at prices yourself of any security, before & after the ex date for price comparison.


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## Toronto.gal (Jan 8, 2010)

humble_pie said:


> no. Think of it this way: "ex" in latin *means without*, so any party buying a stock on its ex-dividend date is buying a stock without its dividend. There are no "adjustments."


LOL, we posted at almost the same time.

Guess that we both love Latin. :biggrin:


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## none (Jan 15, 2013)

Thanks you two - that was really helpful.

I've been meaning to pick up some ZRE (BMO Equal Weight REITs Index ETF) and it's ex-dividend date is this Monday so picking it up on that day is just fine.

So is this ultimately the basis for the 'dividends don't matter' debate? Thanks again.


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## Toronto.gal (Jan 8, 2010)

none said:


> So is this ultimately the basis for the 'dividends don't matter' debate?


There are pros & cons. I would suggest you familiarize yourself with both, and then, based on your goals/knowledge, decide for yourself.


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## humble_pie (Jun 7, 2009)

none said:


> I've been meaning to pick up some ZRE (BMO Equal Weight REITs Index ETF) and it's ex-dividend date is this Monday so picking it up on that day is just fine.
> 
> So is this ultimately the basis for the 'dividends don't matter' debate? Thanks again.



... but keep in mind that if big negative news on canadian real estate markets comes out monday, then the RE sector will droop accordingly.

afaics the dividend debate is about different schools of thought. One school says solid-history-of-dividend-increases-strong-stock means the share price will rise over time. This school has stats, studies & powerful conviction to prove its point.

another school says companies-paying-extra-large-dividends-are-tired-old-dowagers-with-little-hope-for-growth-or-expansion. This school also has stats, studies & powerful conviction.

then there are other schools that pop for fast-growth-microcaps! options! 15-minutes-per-annum-couch-potatoes! invest-in-emerging-markets! comic books! antique ivory carvings!

may a hundred flowers bloom
may a hundred schools of thought contend


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## underemployedactor (Oct 22, 2011)

humble_pie;175513may a hundred flowers bloom
may a hundred schools of thought contend[/QUOTE said:


> You think Chairman Mao was a dividend investor?
> I'd always heard that he prefered collared puts.


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## doctrine (Sep 30, 2011)

Theoretically, it shouldn't matter if you buy before or after ex-dividend. In my experience this more or less evens out. There are sometimes the stock recovers immediately ex-dividend, there are other times it drops 2-3 times the dividend amount on that day. It's really not predictable and so I only concern myself with the amount of the dividend on an annual basis, not the exact timing to get it.


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## none (Jan 15, 2013)

Thanks everyone. This has been very enlightening.


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## gibor365 (Apr 1, 2011)

Interesting article Free Cash Flow Payout Vs. Dividend Payout

http://seekingalpha.com/article/1288321-free-cash-flow-payout-vs-dividend-payout


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## doctrine (Sep 30, 2011)

Free cash flow will almost always be greater than net earnings. Using net earnings for a dividend payout ratio is a safer measure. Many companies, right before a dividend cut, still have a payout ratio of less than 100% of free cash flow or operating cash flow, so in my mind it is not a viable metric, unless the number is really, really low (like 25%).


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## fatcat (Nov 11, 2009)

i have moved almost completely away from index investing, partly becasue i am too cheap to pay any expense ratio and partly becasue i like the transparency, control and predictability that comes with dividend investing

some companies are better as solid, predictable dividend payers and others as growth investments, there is room for both and for all investing styles

i feel that dividend investing is perhaps a better way to go in a slow growth environment which we may well see for the next few years
and if we do see a real bull run, the dividend payers won't do nearly as well as the growth stories but they will still do well enough


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## Jungle (Feb 17, 2010)

Is there any way you can read the seeking alpha article without giving them your email address so they can spam it? 
Very annoying they do this now.


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## Spudd (Oct 11, 2011)

Go to bugmenot.com to get a login/password to use.


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## Jungle (Feb 17, 2010)

Thanks ! That website is great.. it worked too!


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## zinfit (Mar 21, 2021)

Thought I might revive this topic. I suspect a lot of people here are dividend fan boys. Not taking issue but I recall were Charlie Munger inspired Buffett to modified his approach to investing. It is fairly basic if a company has a plus 25% ROE and ROC is the shareholder better served by the corporation paying free cash flow and excess capital in paying dividends or ploughing the cash back into the companies growing and highly profitable operations. Clearly the latter is the obvious choice. Over the past decade one can spot those stocks. CSU is a great Canadian example. In the USA Amazon, Apple and Microsoft would be good examples. I am not a religious follower of dividend stocks but I do have a place for them along with companies with a great ROE and ROC record. I like ROC as it helps to avoid high ROE based on high levels of debt. We have all seen companies that have had fake growth through leveraged debt financing and issuing more shares. acquisitions. That formula is generally a losing strategy.


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## Covariance (Oct 20, 2020)

zinfit said:


> Thought I might revive this topic. I suspect a lot of people here are dividend fan boys. Not taking issue but I recall were Charlie Munger inspired Buffett to modified his approach to investing. It is fairly basic if a company has a plus 25% ROE and ROC is the shareholder better served by the corporation paying free cash flow and excess capital in paying dividends or ploughing the cash back into the companies growing and highly profitable operations. Clearly the latter is the obvious choice. Over the past decade one can spot those stocks. CSU is a great Canadian example. In the USA Amazon, Apple and Microsoft would be good examples. I am not a religious follower of dividend stocks but I do have a place for them along with companies with a great ROE and ROC record. I like ROC as it helps to avoid high ROE based on high levels of debt. We have all seen companies that have had fake growth through leveraged debt financing and issuing more shares. acquisitions. That formula is generally a losing strategy.


I agree with what you are doing since at its cashflow based.

My fundamental strategy at its heart depends on ROIC and FCFE, both forward looking. Basically ROIC gets to the return for the new investment the company is making and FCFE shows cash flow to equity. Both projected 3 or 5 years plus a terminal value. In other words I care about and try to determine hiw management is using the discretionary cashflow and whether it will likely get me a risk adjusted return in the future.

Sometimes a company is best to distribute most of its free cashflow, and in others they have terrific growth opportunities that require a lot of cash for the near future but will grow big businesses down the road.


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## james4beach (Nov 15, 2012)

Anyone notice how crazy the dividend yields have gotten on some Canadian stocks? These are all major TSX stocks:

6.76% , ENB
6.38% , BCE
6.36% , TRP
6.36% , POW
6.35% , BNS
5.99% , PPL


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## like_to_retire (Oct 9, 2016)

james4beach said:


> Anyone notice how crazy the dividend yields have gotten on some Canadian stocks?


It would indicate they're all oversold.

ltr


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## cainvest (May 1, 2013)

james4beach said:


> Anyone notice how crazy the dividend yields have gotten on some Canadian stocks? These are all major TSX stocks:
> 
> 6.76% , ENB
> 6.38% , BCE
> ...


Think they'll be over 7% when prices bottom out?


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## Thal81 (Sep 5, 2017)

There's some really good deals to be had for dividend investors, that's for sure. Or just good deals in general!


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## MrBlackhill (Jun 10, 2020)

cainvest said:


> Think they'll be over 7% when prices bottom out?


In 2009 and 2020, BNS was yielding over 7% during the bottoming and even 8% at the bottom.

I guess the other stocks listed also did.

I believe we'll see lower lows in 2023.

I recall buying BMO.TO at 62 in 2020. That's a yield on cost of 9% today and double the capital. That was almost 7% yield in 2020. And the bottom was actually below 60, I think 55.


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## londoncalling (Sep 17, 2011)

Definitely good news for those seeking a higher yield. I 


james4beach said:


> Anyone notice how crazy the dividend yields have gotten on some Canadian stocks? These are all major TSX stocks:
> 
> 6.76% , ENB
> 6.38% , BCE
> ...


Good news for those looking to add to high yield. I already own all of those names except PPL. I am more concerned about future dividend growth. I expect them all to raise but only to keep their streaks alive. For me I want my dividend increases to keep up to the rate of inflation. This is unlikely to take place for many dividend stocks (nor should it) in the current environment. However, we have seen some great increases over the years which far exceeded the inflation rate. Anybody have names on their watchlist that they are expecting double digit increases over the next year?


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## Beaver101 (Nov 14, 2011)

^ I think MKP (MCAN Mortgage Corp.) will be double digit by the end of the year. Right now, I see it as 9.81%. It is not on my "watchlist" as it's has already been on my list ... for the past decade or so. Not so much as a "dividend" stock but definitely beats out a GIC.


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## james4beach (Nov 15, 2012)

cainvest said:


> Think they'll be over 7% when prices bottom out?


I have no idea. I think it might depend on how much central banks tighten, because these yields compete with the cash rate.

A couple years ago, the risk-free rate was 0% and these kinds of stocks had 5% yield .... 5% more
Whereas today, the risk-free rate is 3% and these stocks have 6% yield ... only 3% more

So I could see the argument that these dividend yields aren't high enough yet. If investors were getting compensated with an extra 5% before, maybe they need an extra 5% today as well? Maybe dividend yields are heading towards 8%

Same story with REITs


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## londoncalling (Sep 17, 2011)

Beaver101 said:


> ^ I think MKP (MCAN Mortgage Corp.) will be double digit by the end of the year. Right now, I see it as 9.81%. It is not on my "watchlist" as it's has already been on my list ... for the past decade or so. Not so much as a "dividend" stock but definitely beats out a GIC.


I am not looking for double digit yield. I am looking for a low to moderate yielding stock that will increase its dividend by 10%or more. I think if the yield of a stock is 10% it is unsustainable. Only during extreme bull markets do I get excited by yields at 7%. I use concepts such as a dividend triangle Narrow Down Your Stock Search With The Dividend Triangle - Dividend Strategists (thestreet.com) or Chowder score How To Use The Chowder Rule (dividendearner.com) to create a mix of low growth high yield (ex. ENB), medium growth, medium yield (T) and higher growth lower yield (CNR).


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## Freedom2022 (Oct 14, 2021)

Why BNS is so cheap compared to other big banks?
Is the dividend sustainable? They may reduce the dividend in the future.


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## londoncalling (Sep 17, 2011)

The dividend is sustainable. BNS has taken over as the laggard of the big 5 from CIBC for a number of years now. Their underperformance is due to their choice to move into Latin America wheras TD and RY opted for US expansion. At some point that may reverse and BNS's strategy pays off. When the banks recently announced hikes post pandemic BNS did not raise as much as others. They didn't need to (nor should they) as they had a big enough yield. Expect reduced increases from BNS but I doubt they will cut their dividend. If the Canadian banks start cutting dividends everybody should be concerned. They haven't cut dividends in over a hundred years.

edit: grammar


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## Covariance (Oct 20, 2020)

With the risk free rate above 4%, some investors have already, and other may soon, stop anchoring on prior dividend yield. In place they go back to fundamentals and look at a build up of risk free rate, and various "premiums" to get to the required return.

In other words it's not a zero rate world anymore and risk needs to compensate the investor with a higher return.


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## james4beach (Nov 15, 2012)

Covariance said:


> In other words it's not a zero rate world anymore and risk needs to compensate the investor with a higher return.


Absolutely. Risk-free at 4% changes everything, not to mention the possibility that rate may go even higher towards 4.5%.

Let's not forget that Canada's 2 year bond now yields *4.05%*. That is AAA quality, government-backed, super liquid, without having to make a long term commitment. The big question I guess is whether the risk free rate really is going to stay this high, or if it's a "blip" before it comes crashing back towards zero.


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## cainvest (May 1, 2013)

james4beach said:


> Absolutely. Risk-free at 4% changes everything, not to mention the possibility that rate may go even higher towards 4.5%.


The only down side is the real return right now.


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## Covariance (Oct 20, 2020)

cainvest said:


> The only down side is the real return right now.


The knock against cash yield is it's less than inflation. But it's been a lot better place to hang this year than equities or bonds which obviously failed to keep up with inflation.


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## cainvest (May 1, 2013)

Covariance said:


> The knock against cash yield is it's less than inflation. But it's been a lot better place to hang this year than equities or bonds which obviously failed to keep up with inflation.


Yes but deploying the cash at the right time could yield some very good results. The short term game is a losing battle (unless you're into shorting) but the long(er) term is what interests me.


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## milhouse (Nov 16, 2016)

londoncalling said:


> Anybody have names on their watchlist that they are expecting double digit increases over the next year?


That's a tall order with businesses prepping for a recession IMO. LOL
The only one on my list/radar that _might _have potential to hit double digits is T. I own it so please take my following commentary with a grain of salt and do your own research.

In their 2022 AGM this spring, they renewed their dividend growth program for 2023-2025, targeting an annual growth rate of between 7 to 10%. They also targeted 7 to 10% during the 2019-2022 period but only hit 7%, 5% (covid year), and 7%. But during the early years of the program starting in 2011, they were regularly hitting 10% annual dividend growth. 

The reason why I feel there's a _possiblity_ they may hit 10% again next year is that most of their fibre build will be complete by end of this year which will decrease their capex spend in 2023 by about $900M and should increase their free cash flow correspondingly by that much. 
They also target a dividend payout ratio of 60-75% of FCF on a prospective basis. During their Q2 earnings call, they said their payout ratio would have been at 56% at the end of Q2 IF they exclude their accelerated broadband capital investment (which, as mentioned earlier, should be complete by end of this year). Being at the lower end of their payout ratio may support being at the higher end of the 7-10% dividend growth target.

Risks I think are working against a 10% increase are:

The possibilty of a recession and potential impact to 2023 expectations/forecasts. IMO, T seems to been conservative to the lower end of their dividend increases when there are financial risks on the horizon. 
The high costs of spectrum auctions and impact to their debt/balance sheet. T is trying to get their debt to EBITDA ratio back down closer to their 2.5x target. If they have to continue to pay a lot for spectrum during the upcoming auctions, they may want to allocate more FCF to paying down debt instead of increasing dividends.
Capital needs of Telus Agriculture and Telus Health. Telus wants to IPO both those units in the next few years but they need to get to a certain size before they can stand on their own. They may need capital to support organic growth or growth by acquisition like what they did recently with Lifeworks.

As an aside, I don't follow Cogeco as in depth but they've had some amazing double digit dividend growth the last number of years and a low payout ratio. Not sure if it will continue into 2023 but we should know soon because I think their Q4 earnings call is coming up where they should be announcing their annual dividend increase.


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## TomB16 (Jun 8, 2014)

I will share the perspective of a long term investor on dividend investing.

We are dividend investors but not because of any specific strategy. It stems from me being reasonably capable of valuing three types of business, two of which are REITs and utilities.

I've tried to find growth opportunities, and we have found a few over the years, but right now I have 1 growth and 6 dividend companies.

I buy what I know and what I believe in. Once owned, I hold these companies as partners.

Our dividends are strong and we have a decent amount of near cash so I have no interest in responding to any macro factors that may be influencing the market. The best thing I can do is stick to what I know.


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## Gator13 (Jan 5, 2020)

TomB16 said:


> I will share the perspective of a long term investor on dividend investing.
> 
> We are dividend investors but not because of any specific strategy. It stems from me being reasonably capable of valuing three types of business, two of which are REITs and utilities.
> 
> ...


Would you mind sharing which companies/reits you are currently holding and how long they've been in your portfolio? Thx


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## londoncalling (Sep 17, 2011)

milhouse said:


> That's a tall order with businesses prepping for a recession IMO. LOL
> The only one on my list/radar that _might _have potential to hit double digits is T. I own it so please take my following commentary with a grain of salt and do your own research.
> 
> In their 2022 AGM this spring, they renewed their dividend growth program for 2023-2025, targeting an annual growth rate of between 7 to 10%. They also targeted 7 to 10% during the 2019-2022 period but only hit 7%, 5% (covid year), and 7%. But during the early years of the program starting in 2011, they were regularly hitting 10% annual dividend growth.
> ...


Thank you for the suggestion. I agree with your commentary and am also a shareholder. It comprises over 3% of my portfolio. I prefer it over other telcos and many other stocks. I am seriously considering overweighting this position as a 5% yield with dividend increases and possible share price appreciation in a couple years is tempting. I think it will provide a better return than a 5 year GIC over that time frame but I could be wrong.


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## TomB16 (Jun 8, 2014)

Gator13 said:


> Would you mind sharing which companies/reits you are currently holding and how long they've been in your portfolio? Thx


Gabor, I apologize for being closed on this. I appreciate the great information shared on this forum by yourself and others but I have never been that open of a person and am not able to operate that way. Further, I don't even share that info with my family or friends.

There are only a few companies I discuss openly and only in a historic context.

Kind regards.


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## Gator13 (Jan 5, 2020)

TomB16 said:


> Gabor, I apologize for being closed on this. I appreciate the great information shared on this forum by yourself and others but I have never been that open of a person and am not able to operate that way. Further, I don't even share that info with my family or friends.
> 
> There are only a few companies I discuss openly and only in a historic context.
> 
> Kind regards.


No worries. I am respectful of others privacy.


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## rgz (Jan 14, 2017)

I haven't seen many suggestions for all-in-one (or all-in-two for stocks & bonds being separate) dividend solutions. Does anyone here have any suggestions? HAZ looks like it could fit this category.









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