# Dividend Growth Investing: Individual Stocks or Broader Dividend or Large Cap ETF?



## milhouse (Nov 16, 2016)

Question for the dividend growth investors out there. 

Do you choose individual stocks for your dividend growth portfolio?
If so, how many individual stocks do you have?
Do you rotate out with a Dogs of the TSX approach or just buy and hold/DRIP? 

Or do you use a dividend ETF? 
If so, what ETF do you use?


I only have about a dozen companies, with core holdings being a couple of companies in financials, pipelines, utilities, telecoms, and some miscellaneous. 
The limited diversification is likely going to get me spanked but that's what is it right now. 
I hold and DRIP.


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## canew90 (Jul 13, 2016)

Being retired for some time, we've consolidated our holding down to 18 companies, no US stocks. When we were accumulating, we held as many as forty (to our regret). Back then mutuals were the rage. I wish we'd followed Connolly's advice not to re-balance, sell for profits or worry about diversification or asset allocation. We hold for the growing income of which we only draw down about 60%.
I personally would not buy a Cdn etf. I did a simple screening of XIU TSX60, CDZ Div Arist and VDZ Verizon High Div.and found I'd eliminate 47% to 57% of their stocks. For the same test of the S&P Div Arist I only eliminated 27%.


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## jargey3000 (Jan 25, 2011)

canew90 said:


> Being retired for some time, we've consolidated our holding down to 18 companies, no US stocks. When we were accumulating, we held as many as forty (to our regret). Back then mutuals were the rage. I wish we'd followed Connolly's advice not to re-balance, sell for profits or worry about diversification or asset allocation. We hold for the growing income of which we only draw down about 60%.
> I personally would not buy a Cdn etf. I did a simple screening of XIU TSX60, CDZ Div Arist and VDZ Verizon High Div.and found I'd eliminate 47% to 57% of their stocks. For the same test of the S&P Div Arist I only eliminated 27%.


hi canew - being in 'retirement mode' myself, i'd be interested in which 18 companies you hold. care to share any (all) of them?. thanks.
(oh - and, who's Connolly?)


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## AltaRed (Jun 8, 2009)

jargey3000 said:


> (oh - and, who's Connolly?)


http://www.dividendgrowth.ca/dividendgrowth/

P.S. Beware putting all of one's eggs into one strategy and in one country. Think Venezuela at the current time. Poo does happen.


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## canew90 (Jul 13, 2016)

jargey3000 said:


> hi canew - being in 'retirement mode' myself, i'd be interested in which 18 companies you hold. care to share any (all) of them?. thanks.
> (oh - and, who's Connolly?)


My holdings are not too hard to identify, as with Milhouse: banks, financials, pipelines, utilities, telecoms, and some miscellaneous. 
Connolly is Tom Connolly of http://www.dividendgrowth.ca/dividendgrowth/ He recommends a strategy, not individual stocks and I agree. Invest for income, try to buy at a reasonable price and hold for increases.


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## canew90 (Jul 13, 2016)

AltaRed said:


> http://www.dividendgrowth.ca/dividendgrowth/
> 
> P.S. Beware putting all of one's eggs into one strategy and in one country. Think Venezuela at the current time. Poo does happen.


Everyone should decide what their goals are, what makes them comfortable, what they want to believe. For us we've decided on DG, sticking with CDN stocks and concentrating our holdings. Others may feel the Couch Potato is best, and some might choose other routes. There is no right choice, only what you feel is best.


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## AltaRed (Jun 8, 2009)

canew90 said:


> Everyone should decide what their goals are, what makes them comfortable, what they want to believe. For us we've decided on DG, sticking with CDN stocks and concentrating our holdings. Others may feel the Couch Potato is best, and some might choose other routes. There is no right choice, only what you feel is best.


Maybe, or maybe not. But I will continue to disagree with you in the broader interest of portfolio construction.

It is hard for Canadians who have not spent much time outside Canada to recognize how puny and unimportant Canada is on the global scale. Literally 3% in just about every material/economic measure. For all the years I spent outside of Canada... no one hardly ever mentioned Canada and when so, mostly that we were nice, but not very street smart (meaning globally savvy). Many other countries were discussed first in terms of economic importance. We are at the mercy of a lot of nations, mostly the USA of course. Poo does happen and a strictly Canadian dividend strategy leaves one quite vulnerable. We just have not seen it yet.

The good news is that many of our major blue chips are multi-nationals so they will not implode if/when Canada falls off the rails. Many (most) of my Cdn dividend stock holdings are thus multi-national by intent.

P.S. I am not knocking a Canadian dividend growth strategy for a portion of the portfolio. Circa 35-40% of my portfolio is in Canadian dividend stocks, most of which grow their dividends, and will remain so. But it is inherently dangerous to get caught up in one's own Kool-Aid.


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## canew90 (Jul 13, 2016)

AltaRed said:


> Maybe, or maybe not. But I will continue to disagree with you in the broader interest of portfolio construction.
> 
> It is hard for Canadians who have not spent much time outside Canada to recognize how puny and unimportant Canada is on the global scale. Literally 3% in just about every material/economic measure. For all the years I spent outside of Canada... no one hardly ever mentioned Canada and when so, mostly that we were nice, but not very street smart (meaning globally savvy). Many other countries were discussed first in terms of economic importance. We are at the mercy of a lot of nations, mostly the USA of course. Poo does happen and a strictly Canadian dividend strategy leaves one quite vulnerable. We just have not seen it yet.
> 
> ...


We lived in the US for 7 years and recognize that the US is much larger, has many more good stocks to choose from and one could do well holding a portion of their funds (in rrsp) invested in the US. I don't get excited about European, emerging, asian markets, or bonds, but like I said, each to their own. Some people would not sleep nights unless they held 30% or 40% in fixed assets. I sleep fine.


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## tygrus (Mar 13, 2012)

Altared, for anyone who has actually been out of canada, its amazing how corrupt the rest of the world is. Canada may be small, but its the most honest market out there. Wouldnt put a dime into china or europe.


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## humble_pie (Jun 7, 2009)

AltaRed said:


> For all the years I spent outside of Canada... no one hardly ever mentioned Canada and when so, mostly that we were nice, but not very street smart (meaning globally savvy). Many other countries were discussed first in terms of economic importance ...
> 
> The good news is that many of our major blue chips are multi-nationals so they will not implode if/when Canada falls off the rails. Many (most) of my Cdn dividend stock holdings are thus multi-national by intent.



kind of a contradiction in the above, no? 

if canadians are so dumb, how were they able to create talented multinational corporations where one is eager to invest one's savings, in order to benefit from their global diversification?

what i believe is that canadians have been first-rate global entrepreneurs at least since WW II, buildiing successful global companies with the help of adventurous experts such as the pre-retirement altaRed ...


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## kcowan (Jul 1, 2010)

humble_pie said:


> kind of a contradiction in the above, no?
> 
> if canadians are so dumb, how were they able to create talented multinational corporations where one is eager to invest one's savings, in order to benefit from their global diversification?
> 
> what i believe is that canadians have been first-rate global entrepreneurs at least since WW II, buildiing successful global companies with the help of adventurous experts such as the pre-retirement altaRed ...


I agree with your point. I don't know about AR though. Probably true.


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## like_to_retire (Oct 9, 2016)

canew90 said:


> Being retired for some time, we've consolidated our holding down to 18 companies, no US stocks. When we were accumulating, we held as many as forty (to our regret). Back then mutuals were the rage. I wish we'd followed Connolly's advice not to re-balance, sell for profits or worry about diversification or asset allocation. We hold for the growing income of which we only draw down about 60%.
> I personally would not buy a Cdn etf. I did a simple screening of XIU TSX60, CDZ Div Arist and VDZ Verizon High Div.and found I'd eliminate 47% to 57% of their stocks. For the same test of the S&P Div Arist I only eliminated 27%.


Canew90, I certainly do agree with your 100% Canadian stocks, as that is also my situation for quite some time - no US or Foreign holdings. I do know the arguments against it as outlined by AltaRed, but I feel that the combined benefits of the Canadian dividend tax advantage, no forex problems, many of the companies being multinational, and all my assets/liabilities in Canadian dollars, is enough to convince me to have 100% in Canadian equities. Those are advantages, that over time, are hard to undermine in my view.

I differ from you in that I am a big proponent in diversification. I have equal weighting (in Canadian equities) in 8 of the 11 sectors (12.5% each in Financial Bank, Financial Non-Bank, Energy, Telecom, Utilities, Consumer Discretionary, Consumer Staples, Industrial. I exclude Materials, Information Tech and Health Care as too volatile). I hold around 24 stocks. I also have a large fixed income allocation.

I too hold no ETFs, and agree that they are full of stocks I wouldn't own. As a result of my individual stock investing, I have handily beat the index I use as my comparison (S&P/TSX60) for many, many years.

ltr


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## AltaRed (Jun 8, 2009)

FWIW, I spent a good part of my career in the USA with some significant time in Europe on projects. Canada really does not factor on their radar screens. We are less important than most other OECD countries and our products are virtually nowhere to be seen. That is the context with respect to being the size we are. 

That said, I have already said 'good things' about our multi-nationals and their success ex-Canada. That is where my money mostly is. So I agree with HP and others on that matter.

What many fail to realize though is how badly we could be hurt economically if we really messed up. Even our multi-nationals would suffer to various degrees depending on their domestic presence. Fortunately, there is not much risk of becoming Venezuela but we could be a Brazil. We just about were in the mid-90s when we just about hit the debt wall. Had Paul Martin not did what he did when he did, we could have easily slid to a 50 cent loonie rather than just 63 cents. The point being: Don't say it cannot happen here.....and hence why I will always have a healthy allocation to other regions and especially the USA.


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## like_to_retire (Oct 9, 2016)

AltaRed said:


> ............ Canada really does not factor on their radar screens. We are less important than most other OECD countries and our products are virtually nowhere to be seen. That is the context with respect to being the size we are.


I've never seen the relevance of this 3% argument everyone uses. Canada seems quite capable in selling its goods. The Canadian companies in my portfolio have been increasing their dividends for decades. They're doing just fine.





AltaRed said:


> That said, I have already said 'good things' about our multi-nationals and their success ex-Canada. That is where my money mostly is. So I agree with HP and others on that matter.
> What many fail to realize though is how badly we could be hurt economically if we really messed up. Even our multi-nationals would suffer to various degrees depending on their domestic presence. Fortunately, there is not much risk of becoming Venezuela but we could be a Brazil. We just about were in the mid-90s when we just about hit the debt wall. Had Paul Martin not did what he did when he did, we could have easily slid to a 50 cent loonie rather than just 63 cents. The point being: Don't say it cannot happen here.....and hence why I will always have a healthy allocation to other regions and especially the USA.


I think you're being overly cautious compared to the huge difference in taxes (and other factors) that add up and up as years go by. 

If I look at TaxTips and examine a person making $50,000 of Canadian dividends in Alberta, they pay $0 in taxes. If that income was from Foreign dividends, then their taxes would be $9,193 every year.

That tailwind, after a number of years, would place the person quite a bit ahead of the foreign investor who worried about Canada's collapse.

ltr


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## AltaRed (Jun 8, 2009)

like_to_retire said:


> I've never seen the relevance of this 3% argument everyone uses. Canada seems quite capable in selling its goods. The Canadian companies in my portfolio have been increasing their dividends for decades. They're doing just fine.


I was meaning exported manufactured products and consumer goods when I said that. Hard to find them in US or European stores. 

One doesn't 'see' the effect of our obvious resource exports. We are also pretty good at selling our services, e.g. SNC, etc. and we are pretty good at buying up foreign companies, e.g. CCL.B, ATD.B, banks, pipelines, etc.






> I think you're being overly cautious compared to the huge difference in taxes (and other factors) that add up and up as years go by.
> 
> If I look at TaxTips and examine a person making $50,000 of Canadian dividends in Alberta, they pay $0 in taxes. If that income was from Foreign dividends, then their taxes would be $9,193 every year.
> 
> ...


FWIW, last year, per my Schedule 4, 62% was taxable amount of eligible dividends, 34% was foreign income (the bulk of it atrributable to foreign dividends) and 4% was Cdn Other. Just the way I want it. And to put further context on this, investment income was about 2/3rds of my total 2016 income, the rest being annuity/pension. I like that split as well.

Added later: FWIW, I checked to see that my MTR on Cdn dividends received is circa 50% that of Foreign Income, but about 69% that of Foreign Income when the grossed-up amount of dividends is used. The grossed up number is the more legitimate one.

And still later: The yield on my ex-Canada equities is also around the 2% range, substantially under the average yield of my Cdn equities. Better to have most of the total return in cap gains than income. Designed intentionally that way.


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## fatcat (Nov 11, 2009)

milhouse said:


> Question for the dividend growth investors out there.
> 
> Do you choose individual stocks for your dividend growth portfolio?
> If so, how many individual stocks do you have?
> ...


i keep thinking about switching to dividend etfs for the simplicity as well as the safety of diversification but i have decided to just stay with a core group of mostly divdidend payers and some growth in the usa

holding specific stocks has so many advantages in terms of cost, record keeping, predictability and so on that i just stay with them ... i had tom connolys newsletter for a couple of years and liked it though i disagree with the notion of not worrying about diversification ... i believe sector diversification is important


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## agent99 (Sep 11, 2013)

AltaRed said:


> I was meaning exported manufactured products and consumer goods when I said that. Hard to find them in US or European stores.


First short anecdote. I was caught in rain while out walking in South Carolina, so went into nearby large hotel. They had nice rain jackets in their gift store. Only $39.00, so expected them to be from China. But no, they were made in Canada! (In Maritimes somewhere)

That is no doubt an outlier. However, whether you are in USA or Europe, much of the product available will not be made locally. Mostly from Asia. And not just clothing. Electronics, tools, whatever.

If you are in USA and want to buy a car, it may very well be built in Canada. And if not whole car, then many parts. If you buy a house in USA and some other locations, it may very well be built using Canadian lumber. The plane you fly in may be made in Canada (or Brazil or France or USA or ?? ) and so on...

I don't think we are doing any worse than many other countries. But true that buyers of our products may not even know they come from Canada. 

By the way, I invest much like ltr (incl lots of FI, except hardly any pfds). No etfs, hardly any MFs, Mostly Canadian dividend payers. Unilever is my only foreign stock. No US stocks but of course many Canadian stocks have interest there and elsewhere.

I don't think it makes any difference where you lived or worked. I have lived in a number of countries and worked in UK, France, USA, Africa & Canada. But I live and am retired in Canada. So that is where my need for most of income is. I could use US$ income for our visits there, but just convert when required. It is true that there is a large selection of stocks there. But that just makes it more difficult to pick. As a result, many Canadians would buy US etfs or funds. Unless hedged, you are then exposed to currency risks. Been burned in past, so no longer risking that. For example, a few weeks ago some pundits were predicting that the C$ would go down to under US$0.70. But it went up to over $0.080 and some predict it will go even higher. Good luck getting that right!


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## canew90 (Jul 13, 2016)

like_to_retire said:


> Canew90, I certainly do agree with your 100% Canadian stocks, as that is also my situation for quite some time - no US or Foreign holdings. I do know the arguments against it as outlined by AltaRed, but I feel that the combined benefits of the Canadian dividend tax advantage, no forex problems, many of the companies being multinational, and all my assets/liabilities in Canadian dollars, is enough to convince me to have 100% in Canadian equities. Those are advantages, that over time, are hard to undermine in my view.
> 
> I differ from you in that I am a big proponent in diversification. I have equal weighting (in Canadian equities) in 8 of the 11 sectors (12.5% each in Financial Bank, Financial Non-Bank, Energy, Telecom, Utilities, Consumer Discretionary, Consumer Staples, Industrial. I exclude Materials, Information Tech and Health Care as too volatile). I hold around 24 stocks. I also have a large fixed income allocation.
> 
> ...


Sounds like you have a good handle on your investments. I got burned on some tech stocks back in the 90's and dumped all my energy stocks way back. Avoided all cyclicals so I ended up with basicly banks, financials, utilities, pipelines and a few others, but not heavily invested in those. I never really compared my returns to the markets or indexes, just concentrated on the growing.income.


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## AltaRed (Jun 8, 2009)

Getting back to the OP's original post, I stock pick Canada and ETF ex-Canada. As Agent suggested, there are way too many stocks ex-Canada to be worth spending any of my time on them. Example: VTI works perfectly fine for USA.


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## james4beach (Nov 15, 2012)

AltaRed said:


> Getting back to the OP's original post, I stock pick Canada and ETF ex-Canada. As Agent suggested, there are way too many stocks ex-Canada to be worth spending any of my time on them. Example: VTI works perfectly fine for USA.


I'm warming up to the idea of just using XAW or VXC for everything outside of Canada. It's half US already, and it seems like the right kind of formulation. I'd like to see a longer track record on XAW, though.


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## james4beach (Nov 15, 2012)

canew90 said:


> Avoided all cyclicals so I ended up with basicly banks, financials, utilities, pipelines and a few others, but not heavily invested in those.


That's pretty similar to my 5 pack approach. I pick the largest XIU constituents and form an equal sector weight portfolio of: financials, utilities, industrials, energy, telecom. Currently this is RY, FTS, CNR, ENB, BCE. This portfolio has 3.7% dividend yield.

I decided on this construction due to the strong total returns, but it happens to also pay out a lot in dividends. In my case I reinvest all dividends (not DRIP, but redeploy periodically) so the dividends don't mean anything special to me.


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## AltaRed (Jun 8, 2009)

james4beach said:


> I'm warming up to the idea of just using XAW for everything outside of Canada. It's half US already, and it seems like the right kind of formulation. I'd like to see a longer track record on XAW, though.


I also have XWD for a good portion of my ex-Canada holdings. It was all that was available at the time. XAW is a better choice (half of the MER and doesn't contain a 3.48% Cdn component like XWD does). Can't switch...not with over 100% unrealized cap gains. C'est la vie......


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## james4beach (Nov 15, 2012)

AltaRed said:


> Can't switch...not with over 100% unrealized cap gains. C'est la vie......


You have a good problem  My parents are in the same boat with XSP. In hindsight, it would be preferable to have non-hedged exposure with a newer ETF such as ZSP. It's just hard to dump it currently.


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## agent99 (Sep 11, 2013)

james4beach said:


> I'm warming up to the idea of just using XAW or VXC for everything outside of Canada. It's half US already, and it seems like the right kind of formulation. I'd like to see a longer track record on XAW, though.


Had a look at XAW/VXC. Probably OK for someone your age. But designed as a long term growth holding. I don't have time left for that


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## canew90 (Jul 13, 2016)

james4beach said:


> That's pretty similar to my 5 pack approach. I pick the largest XIU constituents and form an equal sector weight portfolio of: financials, utilities, industrials, energy, telecom. Currently this is RY, FTS, CNR, ENB, BCE. This portfolio has 3.7% dividend yield.
> 
> I decided on this construction due to the strong total returns, but it happens to also pay out a lot in dividends. In my case I reinvest all dividends (not DRIP, but redeploy periodically) so the dividends don't mean anything special to me.


They may not mean much to you, but look at the growth of the dividends with just those stocks mentioned, all star holdings in five sectors. IMO if one held nothing else they'd be fine.


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## james4beach (Nov 15, 2012)

canew90 said:


> They may not mean much to you, but look at the growth of the dividends with just those stocks mentioned, all star holdings in five sectors. IMO if one held nothing else they'd be fine.


I agree that these are great holdings. I didn't mean that the dividends are worthless, just that I consider them part of the total return -- I'm not extracting them as cash payouts.


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## humble_pie (Jun 7, 2009)

james4beach said:


> You have a good problem  My parents are in the same boat with XSP ... It's just hard to dump it currently.




here's a simple strategy for curing the can't-sell-because-capital-gains-will-kill-me blues.

the catch is that one has to start youngish. Maybe age late 50s or 60s. It won't work late in life, there won't be enough years.


step 1 - investor holds 1000 shares with cost of 45.00/sh while market is 90.00. Total cost was $45,000. Investor now buys an extra 100 shares @ 90 to hold 1,100 sh. Cost base is now $54,000 or 49.09/sh.

step 2 (a) - inv donates 100 shares to a charity & receives tax deductible receipt for $9,000. No taxable gain. Remaining holding is 1000 shares w cost base $54,000 or 54/sh.

or

step 2 (b) - inv sells 100 shares at 90.00, for a taxable capital gain of 36, or $3,600. Only $1,800 or 50% of this gain will be included in taxable income. It's a piffle amount, will likely not be enough to push investor into next higher tax bracket. Investor should run a tax scenario first to confirm though. 

remaining holdng becomes 1000 shares w same cost base, $54,000 or 54/sh.


an investor who has losses to offset can buy/sell more shares in step 2. The key thing is to keep repeating this, a micro-sale every year, year after year.

it's a little more tax efficient to buy first, then sell or donate. However the manoeuvre can certainly be done sell first, then buy to replace.

_hint: don't push cost base too high, if a market correction occurs you'll be sorry. In my case, the risk of option assignment requires that cost be kept at a reasonable level. My theoretical goal is cost roughly 25% below market, but these days with markets so high it's ragged.
_
.


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## Pluto (Sep 12, 2013)

milhouse said:


> Question for the dividend growth investors out there.
> 
> Do you choose individual stocks for your dividend growth portfolio?
> If so, how many individual stocks do you have?
> ...


Limited diversification might be what saves you. Over diversification can be a heavy weight, and a performance killer. Don't by low quality companies just for the sake of diversification. A dozen is likely fine, but a few more isn't necessarily bad either. It isn't the exact number that is important, its the quality. Debt/equity has to be reasonable for the industry of the company. Return on equity should be above average as well- say 14-15% or better. It doesn't make sense to buy a company with out of control debt, and a minimal return on equity just to be diversified. 

Dividend etf: I don't use them myself. The fees are lower than mutual finds, but they are ongoing fees. Why not just buy individual stocks for a one time low comission? I'm not against people using etf's if that's what suites them, but you already have individual stocks, so why go back? 

I have about 17 dividend payers, and will hold them as long as the fundamentals keep them in the quality range. 
I also have about a half dozen growth stocks to juice up cap gain returns. Eventhough I'm retired I'm OK with this. Younger people should definately consider growth stocks. When they get older they can transition into higher dividend stocks. You can reach your goals of retirement dividend income much faster. 

My fictional Canadian growth portfolio of 10 stocks is up about 24% in the last 12 months, and my fictional dividend income portfolio of 10 stocks total return is about 11% in last 12 months. A balanced portfolio of 5 growth and 5 dividend payers is up 19.7% in last 12 months. This is while the tsx index has been drifiting down since last Jan-Feb. 
I use a mix of growth and dividend payers, but not 50/50. about 70% dividend growers.


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## Jaberwock (Aug 22, 2012)

When I started investing, there were very few ETFs, and the ones available were large index ETFs rather than specialized dividend ETFs. For that reason, I started picking my own stocks, and I have never considered using an ETF.

I have 50 stocks - probably too many, but I buy and hold usually, so I tend to accumulate more stocks as time goes on.

The mix is 85% CDN, 15% US though some of the CDN (for example my biggest holding BIP.UN) are companies which derive their income mostly from outside of Canada, and some of the CDN stocks pay dividends in US dollars. I have some preferreds (rate-reset) which I bought with a particular strategy to take advantage of rising interest rates.

I have some REITs, and some smaller cap dividend payers. In total the dividends amount to just over 5% of the portfolio value. 

My biggest holdings are: BIP.UN, RY, IPL, BNS, EMA


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## milhouse (Nov 16, 2016)

AltaRed said:


> We just about were in the mid-90s when we just about hit the debt wall. Had Paul Martin not did what he did when he did, we could have easily slid to a 50 cent loonie rather than just 63 cents. The point being: Don't say it cannot happen here.....and hence why I will always have a healthy allocation to other regions and especially the USA.


+1 to that comment. That was a pretty key inflection point in Canadian fiscal policy.


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## milhouse (Nov 16, 2016)

AltaRed said:


> Getting back to the OP's original post, I stock pick Canada and ETF ex-Canada. As Agent suggested, there are way too many stocks ex-Canada to be worth spending any of my time on them. Example: VTI works perfectly fine for USA.


That's what I'm generally what I'm trying to do with my non-registered portfolio primarily being Canadian dividend growth stocks and registered portfolios ETF ex-Canada. However, the enchanting lure of the FANG "sirens" is hard to ignore.


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## My Own Advisor (Sep 24, 2012)

Poo does and will happen sometimes...

So...this is where I personally feel diversification is important. 

Just did a tally....own 40 CDN dividend stocks + a few U.S. multinationals (JNJ, PG, KO, EMR, DUK, SO, ED, VZ, T). 
Indexing everything else using VTI or HDV or VYM. Slowly building up some VXUS.

Like other CDN dividend investors - own banks, lifecos, pipelines, utilities and REITs for income and likely always will unless these companies flat out kill their dividend.


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## Eder (Feb 16, 2011)

I've almost gotten rid of all my REITS...only B2B & First Capital left & I think First Capital gets the axe soon. REIT's are failing to "Show me the money!".


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## DigginDoc (Sep 17, 2015)

AltaRed said:


> I also have XWD for a good portion of my ex-Canada holdings. It was all that was available at the time. XAW is a better choice (half of the MER and doesn't contain a 3.48% Cdn component like XWD does). Can't switch...not with over 100% unrealized cap gains. C'est la vie......


 I was reading up and considering XAW for my non-registered US component also. No room left in my tfsa s or anywhere else. Is there a lot of work at tax time to it? 
Cheers 
Doc


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## AltaRed (Jun 8, 2009)

DigginDoc said:


> I was reading up and considering XAW for my non-registered US component also. No room left in my tfsa s or anywhere else. Is there a lot of work at tax time to it?
> Cheers
> Doc


I don't own it. But the T3 will likely show Foreign Income, possibly some return on capital (but not likely since it is all ex-Canada) and just as importantly, it might have phantom re-invested distributions that you have to get off the BlackRock website in January of each year. I just looke up its historical distributions and indeed it did have a phantom re-invested distribution for 2016 (but not 2015). Phantom re-invested distributions are not shown on the T3 tax slip but they are important to you because they INCREASE your ACB.

I don't find this sort of thing onerous... Takes just maybe 10 minutes per ETF each March to adjust one's ACB. The T3 tax slip is plenty simple enough to fill in the right boxes in tax software.


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## DigginDoc (Sep 17, 2015)

AltaRed said:


> I don't own it. But the T3 will likely show Foreign Income, possibly some return on capital (but not likely since it is all ex-Canada) and just as importantly, it might have phantom re-invested distributions that you have to get off the BlackRock website in January of each year. I just looke up its historical distributions and indeed it did have a phantom re-invested distribution for 2016 (but not 2015). Phantom re-invested distributions are not shown on the T3 tax slip but they are important to you because they INCREASE your ACB.
> 
> I don't find this sort of thing onerous... Takes just maybe 10 minutes per ETF each March to adjust one's ACB. The T3 tax slip is plenty simple enough to fill in the right boxes in tax software.


Thanks AltaRed
I Appreciate the info. I haven't got any US coverage yet but would like to add it to my non reg legacy accounts.
Cheers 
Doc


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## Eclectic12 (Oct 20, 2010)

AltaRed said:


> DigginDoc said:
> 
> 
> > I was reading up and considering XAW for my non-registered US component also. No room left in my tfsa s or anywhere else. Is there a lot of work at tax time to it?
> ...


Actually it looks like it will have Return of Capital (RoC) as the 2016 tax breakdown shows the types of income paid as "Capital Gains", "Return of Capital", "Foreign Income" and "Foreign Tax Paid". The phantom distribution is not supposed to be received as cash so there may be CG to pay tax on, in addition to the phantom distribution.

The 2015 breakdown is easier as it is only "Capital Gains", "Foreign Income" and "Foreign Tax Paid". From what AltaRed has said, there are no phantom distributions in 2015.

http://www.taxtips.ca/personaltax/investing/taxtreatment/etfs.htm




AltaRed said:


> ... I don't find this sort of thing onerous... Takes just maybe 10 minutes per ETF each March to adjust one's ACB. The T3 tax slip is plenty simple enough to fill in the right boxes in tax software.


I moved my ETFs into registered accounts but have to do similar for REITs. The time consuming part for me was learning what info was needed, where to find it and tweak my spreadsheet to take these into account.

The T3 forms from the broker roll up as many as five investments so I usually spot check the sub-totaled numbers against what the investment web site has published around March.

Tedious but not particularly time consuming.


Cheers


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## AltaRed (Jun 8, 2009)

Indeed, if one has more than one ETF on the T3 tax slip, one needs to look at the sub-totals on the accompanying Summary of Annual Income and Expenses to attribute the correct ROC to the right ETF. My ex has 6 Cdn domiciled ETFs in her non-reg account. It takes me about half an hour each year to update her ACB database for ROC and to check each of the BlackRock and BMO websites for phantom re-invested distributions. I think about half of her ETFs had ROC in 2016 and about half had re-invested distributions that required updating of her ACB database. It simply does not take much time at tax time to do both on a small number of ETFs.

With a Couch Potato portfolio, with no trades and no DRIPs, it really is about as simple as it can get. There are no entries to work through on Schedule 3 or ACB updates needed on DRIP'd distributions. 

IMO, people complain way too much about ACB adjustments with ETFs.


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