# Senior's dividend investing portfolio?



## jargey3000 (Jan 25, 2011)

I'm sure similar threads have been posted before. Suppose you were (are) a 60+ individual who's considering putting together a "set-it-and-forget-it" portfolio that might provide a stream of income from dividends. Let's say a basket of NO MORE (and preferably less) than 10 investments (stocks, ETFs, REITs, other?), with preservation of capital and consistency of dividends being key components. And a mix of Cdn.& US vehicles to generate approx. 80-85% Cdn and 15-20% US income annually. What would you put in your basket these days?


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## Eder (Feb 16, 2011)

There was a lot of great comments in the Argo 6 pack thread...generally 6 large cap stocks, leaders of their sector, actively raising their dividends providing Canadian dividends but with North American and some global exposure as well.


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## My Own Advisor (Sep 24, 2012)

No more than 10 investments in total?

Hummm, if that is the criteria, I'd probably go with something like this for income for life:

1. 3 big banks - TD, BNS, RY - you also get international exposure here. Steady yield of 4% for life and dividend increases every year.
2. 2 utilities - EMA, FTS. Same yield, cash for life, dividend increases.
3. 1 CDN REIT ETF - VRE (one of lowest MER of CDN REITs). Steady yield of 4% or more.
4. 1 US REIT ETF - VNQ. Steady yield of 4% or more.
5. 1 US Dividend ETF - HDV. Yield of >3.5%.
6. 1 International Dividend ETF - IDV. Yield of >4%.
7. 1 Canadian bond ETF - XSB. Don't worry about yield, keep ~10% of portfolio, good for capital preservation.

Enjoy!


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## mordko (Jan 23, 2016)

^ In my opinion that is a high-risk portfolio, inappropriate for a 60-year old individual. 

Assuming it's 10% per investment, will be very easy to lose a large chunk due to a single event impacting just one company. Furthermore there is little geographic diversification, just 3 industry sectors, and they are heavily correlated sectors at that. If one of the big banks is impacted, all three are likely to stumble. Besides, banks are experiencing headwinds as their models have to be revised as investors start shifting to cheaper internet products at the same time as the regulatory pressure is increasing. 

A simple ETF-based Couch Potato is also a "dividend" portfolio.


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## GreatLaker (Mar 23, 2014)

CCP balanced portfolio:
http://canadiancouchpotato.com/wp-content/uploads/2016/01/CCP-Model-Portfolios-Vanguard-2015.pdf
except split the fixed income half Canadian aggregate bond fund and half 5-year GIC ladder

Most boring portfolio in the world.


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## Jaberwock (Aug 22, 2012)

Two Canadian stocks that pay dividends in US dollars - takes care of your 15% US dollar income
BIP.UN
AQN

Two banks
RY
TD 

Pipelines
ENB

Utilities
EMA

An old folks home - you may end up there, you might as well own it
Choose from CSH.UN, SIA, EXE

A telecom
T or BCE

A railway
CN

A REIT- lots to choose from


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## My Own Advisor (Sep 24, 2012)

mordko said:


> ^ In my opinion that is a high-risk portfolio, inappropriate for a 60-year old individual.
> 
> Assuming it's 10% per investment, will be very easy to lose a large chunk due to a single event impacting just one company. Furthermore there is little geographic diversification, just 3 industry sectors, and they are heavily correlated sectors at that. If one of the big banks is impacted, all three are likely to stumble. Besides, banks are experiencing headwinds as their models have to be revised as investors start shifting to cheaper internet products at the same time as the regulatory pressure is increasing.
> 
> A simple ETF-based Couch Potato is also a "dividend" portfolio.


I wouldn't assume 10% per investment. Just like you wouldn't assume in a simple CPP portfolio that it must be 33% per 3 investments, or 25% per 4 investments, etc.


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## leeder (Jan 28, 2012)

jargey3000 said:


> I'm sure similar threads have been posted before. Suppose you were (are) a 60+ individual who's considering putting together a "set-it-and-forget-it" portfolio that might provide a stream of income from dividends. Let's say a basket of NO MORE (and preferably less) than 10 investments (stocks, ETFs, REITs, other?), with preservation of capital and consistency of dividends being key components. And a mix of Cdn.& US vehicles to generate approx. 80-85% Cdn and 15-20% US income annually. What would you put in your basket these days?


It really depends on how risk tolerant the senior investor is. If it is a "set-it-and-forget-it" portfolio with capital preservation and steady income as the goal, a significant portion of the portfolio must contain fixed income (not just stocks, equity ETFs, REITs).

I would propose the portfolio would look something like below, but the percentage depends on the risk tolerance of the investor:

Cdn:
40% VSB - rationale for using short-term index bond ETF is that there is volatility in case interest rate rises. This can also be replaced by 5-year ladder GIC; however, an ETF is more liquid.
20% VCN - an ETF like VCN would provide proper diversification and reduce individual stock risk. If the investor chooses stocks, the Argonaut 5-pack is a pretty decent starting point. Perhaps that 20% can be split 5 ways between a bank stock (e.g., TD), utility stock (e.g., FTS), pipeline stock (e.g., ENB), telecom stock (e.g., BCE), and railway stock (e.g., CNR).
30% XAW

US:
10% BSV (or some low cost short-term bond index ETF - most Vanguard products are pretty good)

In my opinion, the steady income should come from the short-term bond index ETFs. My preference would be to stick with the ETFs rather than invest in stocks - nice, easy-to-manage portfolio.


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## james4beach (Nov 15, 2012)

jargey3000 said:


> with preservation of capital and consistency of dividends being key components


Well to clarify something, any dividends you take as cash _instead_ of reinvesting are drawing down your capital. Different people mean different things by "preservation of capital". I presume you mean that you don't want your stock balance to decline over time? Also see: https://www.ljcooper.com/wp-content/uploads/2015/03/Yield-vs.-Total-Return-1-1.pdf



> And a mix of Cdn.& US vehicles to generate approx. 80-85% Cdn and 15-20% US income annually. What would you put in your basket these days?


Assuming you're only looking for stocks...

How about simple old passive indexes: XIU for Canada - wouldn't that meet your criteria? For the US, see this recent thread. VYM looks like a good one.

XIU pays very high dividends as nearly pure eligible dividends for maximum tax benefit. It's as diversified as the Canadian index. Vanguard VYM is nicely diversified and performs very similarly to the S&P 500, at least in the last few years.


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## james4beach (Nov 15, 2012)

My Own Advisor said:


> 7. 1 Canadian bond ETF - XSB. Don't worry about yield, keep ~10% of portfolio, good for capital preservation.


Another option I like for this purpose is XSH, short-term corporate bonds.

This vehicle is well suited for retirement purposes. It pays a large distribution, 3.0%, paid monthly. (The yield-to-maturity is 1.7%). Because it pays the large 3.0% distribution, this is a good way to steadily extract cash from your portfolio. The distribution has also been very steady each month.


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## My Own Advisor (Sep 24, 2012)

XSH could work as well....lots of bond ETF options, but as you know, keep bond holdings short.

XIU is an excellent dividend and growth product all-in-one. Hard to argue with 10-year returns where it holds, arguably, all the stocks that make Canada run.


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## james4beach (Nov 15, 2012)

My Own Advisor said:


> XIU is an excellent dividend and growth product all-in-one. Hard to argue with 10-year returns where it holds, arguably, all the stocks that make Canada run.


I agree, XIU is spectacular from a dividend perspective and tax efficiency.

Its performance since inception in late 1999 is an amazing 6.94%


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## Eclectic12 (Oct 20, 2010)

^^^^

True ... though in a taxable account, one needs to make sure the investor's portion of phantom distributions (listed in 2015 as eleven phantom distributions totaling over $6.19 per unit since payments began in 1999. 

http://www.fundlibrary.com/features/etfs/page.asp?id=15488


That's in addition to adjusting one's ACB for return of capital (RoC) paid in all but one year of 1999 through 2015 of the distributions on the iShares web site.



Cheers


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## james4beach (Nov 15, 2012)

I'm using the performance figures from iShares web site, and I'm pretty sure that's net of all distributions including reinvested shares/phantom distribs. So that is the actual performance, assuming you correctly tracked your ACB and reinvested all distributions. It's a terrific performance considering that it starts at the worst possible time, right before the 2000 meltdown


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## agent99 (Sep 11, 2013)

james4beach said:


> I'm using the performance figures from iShares web site, and I'm pretty sure that's net of all distributions including reinvested shares/phantom distribs. So that is the actual performance, assuming you correctly tracked your ACB and reinvested all distributions. It's a terrific performance considering that it starts at the worst possible time, right before the 2000 meltdown


Not sure what you meant by "correctly tracked your ACB" in this context. To consider affect of ROC, I think you would have to calculate after tax return.

By the way, I didn't spend much time, but I could not find a breakdown of distributions for XIU for tax purposes. I did find this for 2014, and it is not too significant:


> With most ETFs that hold common stocks, ROC amounts are small. Canada’s largest ETF, the iShares S&P/TSX 60 Index ETF (XIU), for example, distributed about 2.8 cents of ROC in 2014, representing about 5 per cent of its total distribution that year.


You really think 6.9% is terrific when a bank like RY had a 13.1% total return?


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## james4beach (Nov 15, 2012)

agent99 said:


> *You really think 6.9% is terrific* when a bank like RY had a 13.1% total return?


Yes it is undeniably terrific!! One stock had a higher performance, so what? We're talking here about the broad market, 60 top stocks and many sectors. You can always find single stocks or sectors that over or under performed. Hell, I've been pointing out for a while that inert gold bullion performed even better than this.

This is a 17 year return with zero effort. It started near the peak of a bubble, and even the TSX was heavily weighted towards Nortel. Despite all of this...

XIU return since 1999-09-28 was 6.9% annualized. Compare to SPY, the oldest tracker of the S&P 500, which returned 4.9% in the same period. And that is the world's favourite investment, also the best performer in recent years.

How are you not impressed by XIU's performance?

Do you think the S&P 500 has been a good investment in the same period? Oh I guess not, because it under-performed AMZN... c'mon man


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## agent99 (Sep 11, 2013)

james4beach said:


> Yes it is undeniably terrific!! One stock had a higher performance, so what?
> 
> How are you not impressed by XIU's performance?


There were quite a number of other stocks that are contained in XIU that also did well over that period. But because XIU contained other poor performers, it's performance was dragged down. It might be OK for a new investor or those who are unable or do not wish to build their own portfolio. Personally, I don't own any ETFs.


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## james4beach (Nov 15, 2012)

I will add that if we're talking about zero-effort diversified investments, even better returns were seen with:

BRK.B (Berkshire Hathaway)
Mawer Canadian Equity fund


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## james4beach (Nov 15, 2012)

For every agent99 out there (a guy like you who's able to pick the best companies, reliably, decade after decade) there are ten investors who chronically pick worse stocks than the index.

Even Warren Buffett says that his estate will remain invested in the S&P 500 index + short term bond fund after he passes


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## Argonaut (Dec 7, 2010)

6.9% annualized is pretty bad on a risk asset like stocks. I have a bare minimum requirement of 7.2% annualized on my whole portfolio. Anything lower than that and I'm not doubling my money every 10 years, per the magical Rule of 72. With a dividend portfolio yielding 4% you don't need much more in the way of capital gains or dividend increases.


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## james4beach (Nov 15, 2012)

Argonaut said:


> 6.9% annualized is pretty bad on a risk asset like stocks.


Then you must think the investors in SPY, IVV, VTI and Vanguard's flagship mutual fund (VFIAX) are total fools ... there's well over $500 BILLION invested across those.

And XIU has outperformed all of them since inception


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## Argonaut (Dec 7, 2010)

Not total fools, but I would supplement that investment in the S&P with an equal weight in gold. Very weak or negative correlation with stocks most of the time. Combine gold with the index over the same period to get those sexy risk adjusted returns.

*Argonaut's Golden Fleece Portfolio*
25% Canadian Dividend 6-Pack
25% S&P 500
25% Precious Metals
25% Cash and/or Bonds


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## james4beach (Nov 15, 2012)

Argo, your investment plan is extremely similar to mine. Allocations are a bit different, and I'm swapping my own methods in lieu of your 6-Pack, but really is the same theme -- a mix of stocks (all in US & Canada), gold, cash, bonds.

And yes I absolutely agree that adding gold (a diversifying asset class) gives better risk adjusted returns, and volatility dampening.

It's kind of nice to see that we both got to such similar portfolio constructions


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## gibor365 (Apr 1, 2011)

My Own Advisor said:


> No more than 10 investments in total?
> 
> Hummm, if that is the criteria, I'd probably go with something like this for income for life:
> 
> ...





> ^ In my opinion that is a high-risk portfolio, inappropriate for a 60-year old individual.


I'd say ...leave 40% as cash/GIC and do with other 60% like MOA said


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## Eclectic12 (Oct 20, 2010)

Argonaut said:


> james4beach said:
> 
> 
> > Then you must think the investors in SPY, IVV, VTI and Vanguard's flagship mutual fund (VFIAX) are total fools ... there's well over $500 BILLION invested across those ...
> ...


Good to know the breakdowns and where one is willing to roll one's one version.

At the same time, other than making sure the investment is liquid - I am not clear on why popularity or amount invested matters. 
Isn't the aim meeting one's needs or total return?


Cheers


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## james4beach (Nov 15, 2012)

Dollars are votes. I'm saying that the investment world has "voted" and spoken, that the S&P 500 is a good investment. This is according to all the fund managers, pension managers, hedge funds, PhD analysts, retail and institutional investors in the world.

S&P 500 is a good investment.

And XIU has outperformed the S&P 500 over its entire existence.

Therefore, XIU is a good investment. You guys are saying it's not, and I'm baffled by this.


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## agent99 (Sep 11, 2013)

james4beach said:


> Dollars are votes. I'm saying that the investment world has "voted" and spoken, that the S&P 500 is a good investment.


I imagine quite a bit more is invested in US treasury bonds ($13,650 Billion?) compared with the S&P500? Should we buy those bonds just because the investment world has "spoken"? But you are right, they have 'spoken', but does that make them a good investment for us?

There is no 'one size fits all' when it comes to investing. Nothing against S&P500 or XIU *IF* the shoe fits.


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## agent99 (Sep 11, 2013)

gibor365 said:


> I'd say ...leave 40% as cash/GIC and do with other 60% like MOA said


Probably Ok. 

However, some have company pensions or other sources of income that can be thought of as fulfilling the role of cash/fixedincome. 

I hate using percentages. As the equity markets go up and down those cash/fixed income percentages change. I probably had about 60% in FI in 2009 and now have 40% and I have hardly bought or sold anything!


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## james4beach (Nov 15, 2012)

You're right about the consideration of whether it's right for us... is it right for my particular situation?



agent99 said:


> I imagine quite a bit more is invested in US treasury bonds ($13,650 Billion?) compared with the S&P500? Should we buy those bonds just because the investment world has "spoken"?


Speaking in general terms though: if you're a globally-minded fixed income investor, then yes - US treasury bonds probably are a good investment.

When you're talking stock investment, S&P 500 is considered a good investment (again in general).



> There is no 'one size fits all' when it comes to investing. Nothing against S&P500 or XIU *IF* the shoe fits.


True and I understand your point about individual requirements. But I still maintain that in general terms, both US treasuries and S&P 500 are considered good investments for their asset classes.


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## Eclectic12 (Oct 20, 2010)

james4beach said:


> Dollars are votes. I'm saying that the investment world has "voted" and spoken, that the S&P 500 is a good investment ...
> And XIU has outperformed the S&P 500 over its entire existence. Therefore, XIU is a good investment.
> 
> You guys are saying it's not, and I'm baffled by this.


Asking the relevance beyond liquidity of Billions invested told you about what I think of XIU?

Aren't you forgetting I've said in other threads I like XIU then lumping me in with the other posters?


Though with XIU dropping 37% in 2008 while my equity dropped 10% ... I am re-evaluating for my own use.
It won't change whether someone with different skills and aims finds it more or less attractive.


Cheers


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## doctrine (Sep 30, 2011)

james4beach said:


> And XIU has outperformed the S&P 500 over its entire existence.
> 
> Therefore, XIU is a good investment. You guys are saying it's not, and I'm baffled by this.


I would agree that the TSX is a good investment overall. S&P 500 does have a longer history of strong performance. I tend to weight them equally. 50% VCN and 50% VFV, so they trade in different currencies. This also tends to reduce correlation. TSN isn't as balanced, so a 30-70 approach might be good as well.


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