# Choosing Dividends over Capital Gains



## dogleg1 (Jul 4, 2016)

If we listened to Kevin O'Leary we would only select investments that primarily yield dividends over capital gains. What arguments should we make for one versus the other?


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## AltaRed (Jun 8, 2009)

dogleg1 said:


> If we listened to Kevin O'Leary we would only select investments that primarily yield dividends over capital gains. What arguments should we make for one versus the other?


Why is he saying that? Please provide context. 

1) The downside of dividends is that you pay tax on those dividends annually whereas with cap gains, it is all tax deferred until you sell the investment.

2) There is also the actual tax considerations. Depending on one's income, the effective tax rate on eligible dividends could be more (or less) than the effective tax rate on cap gains.

3) Dividend income is grossed up and affects OAS clawback for those in clawback territory.

4. OTOH, there is empirical evidence that managements of companies that pay dividends are less reckless with shareholder money than those who are hell bent on earnings and share price growth only. IOW, managements of companies that pay dividends are more careful with how they use their cash flow because they are more reluctant to ever get in a position to have to cut a dividend and cause their shareholders to go off the deep end and collapse their share price.


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## mark0f0 (Oct 1, 2016)

A dividend shouldn't be paid if management can reasonably and consistently identify investments in their business with returns that exceed the business's cost of equity capital.

I think a balanced approach probably gets you better results. Extremities tend to underperform, whether it was the income trusts which, by law, paid 100% of their cashflows out as earnings. Or the other extreme, that of the 'growth' stocks which tend to be highly cyclical and tend to, as a basket, statistically underperform.

Mr. O'Leary was a big pumper of the income trusts in the mid 2000s on his ROBtv and BNN appearances. Yes, (the Finance Minister at the time) Flaherty will get a lot of the blame in the hearts of investors as he popped the bubble with the Budget 2006 phase-out. But most of the income trusts were asset strippers and were destined for underperformance anyways.


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## Koogie (Dec 15, 2014)

Proper financial theory tells us that we should be concerned with Total Return. However, emotions override logic and received money in hand is valued more highly over the promise of higher future gain (see the marshmallow experiment).

I find a signature line that a poster on another forum has, sums up the concept of dividend preference well:

""A dividend is a dictate of management. A capital gain is a whim of the market.""


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## Eclectic12 (Oct 20, 2010)

AltaRed said:


> Why is he saying that? Please provide context.


This would certainly help evaluate the statement.




AltaRed said:


> ... 1) The downside of dividends is that you pay tax on those dividends annually whereas with cap gains, it is all tax deferred until you sell the investment.


Unless one has mistaken mixed income from a REIT or ETF or income fund for "dividends" ... in which case, one might be paying CG, dividends and other income (taxed like employment income) yearly or sporadically.




AltaRed said:


> ... 2) There is also the actual tax considerations. Depending on one's income, the effective tax rate on eligible dividends could be more (or less) than the effective tax rate on cap gains.


A lot of people miss that in several tax jurisdictions, towards the upper end of the income levels - eligible dividends overtake capital gains for the tax rate.


There's also that where one makes a priority to avoid dividends, one is forced to rule out a higher percentage of the TSX as well as the S&P500. There's also the issue that companies in a sector of a reasonable size/trade volume are all paying dividends.


Cheers


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## james4beach (Nov 15, 2012)

dogleg1 said:


> If we listened to Kevin O'Leary we would only select investments that primarily yield dividends over capital gains. What arguments should we make for one versus the other?


The two (dividends and price increases) are both parts of total return. Focusing on either aspect alone is a mistake... you should always look at performance on a total return basis.

It's also helpful to understand _where_ a dividend comes from. It's not "new" money. That cash already exists in the corporation (Retained Earnings), and they are simply making a cash transfer. The cash leaves the corp and is received by shareholders.

So the dividend is simply cash that is moved out of the corp's Retained Earnings and into the hands of shareholders. No value is created in the process. This remains a fundamental misunderstanding of dividends, as many people it's free money that _adds_ to returns. It doesn't add. It's just a cash transfer from the corp to you.


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## Eclectic12 (Oct 20, 2010)

mark0f0 said:


> A dividend shouldn't be paid if management can reasonably and consistently identify investments in their business with returns that exceed the business's cost of equity capital.


Great in theory ... which large Canadian bank do you recommend that doesn't pay dividends?

Or utility or pipeline or insurance company ... 




mark0f0 said:


> ... I think a balanced approach probably gets you better results.


With the dividend payers making up 80% or better of the TSX and S&P500, by definition won't a "balanced" approach rule out a lot of sectors/companies?




mark0f0 said:


> ... But most of the income trusts were asset strippers and were destined for underperformance anyways.


You mean like Boston Pizza Royalties Income Fund? (They are still a trust BTW.)
The Bell Canada conversion to a trust?

Or how about RioCan?


Cheers


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## zylon (Oct 27, 2010)

Everything Kevin O knows about dividends in under 9 minutes.

https://www.youtube.com/watch?v=9PMkgtwMkxc


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## gibor365 (Apr 1, 2011)

> Why is he saying that? Please provide context.
> 1)
> 2)
> 3)
> 4)


 all you list are for registered accounts , for registered - none applies...
Dividends are ususally more predictable then capital gain/loss ... For accounts like RRIF/LIF , I'd prefered to have minimum payments from dividends (just turning off DRIPs on some of the stock) then sell some equities


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## AltaRed (Jun 8, 2009)

Eclectic12 said:


> Unless one has mistaken mixed income from a REIT or ETF or income fund for "dividends" ... in which case, one might be paying CG, dividends and other income (taxed like employment income) yearly or sporadically.


 Indeed. Folks should never use the word 'dividends' if the income is indeed distributions (a variety of types of income).


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## mordko (Jan 23, 2016)

Dividends are correlated to the value factor. Also a major component for predicting long-term return.

Right now in Canada dividends are in fashion which translates to over-valuation and reduction in long-term returns from industries paying higher than average dividends. There has already been a bit of a correction. 

Having said this, not a big fan of pure growth plays which don't pay any dividend unless its BRK.


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## Eder (Feb 16, 2011)

I can get over 50k dividends/year no tax...of course I want equities that pay dividends.


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## mark0f0 (Oct 1, 2016)

Eclectic12 said:


> With the dividend payers making up 80% or better of the TSX and S&P500, by definition won't a "balanced" approach rule out a lot of sectors/companies?


Perhaps I didn't make my point clear. "Balance" is the fact of paying a dividend, in addition to retaining some earnings, in addition to doing some buybacks. A middle ground which tends to lead to better performance over the long term than, for example, retaining all earnings. Or paying all cashflows as dividends.




> You mean like Boston Pizza Royalties Income Fund? (They are still a trust BTW.)


A rare example amidst the large numbers of income trusts that were dramatically overvalued and only derived their cashflows through vigorous short-term asset stripping. 



> The Bell Canada conversion to a trust?


Didn't happen. Thank heavens, because investment requirements have ramped up significantly in the telecom sector in response to the smartphone/mobile data revolution.


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## doctrine (Sep 30, 2011)

Usually, companies that can afford dividends have a solid underlying business that generates strong free cash flows. Thus, the dividend is a value screen for these companies that can help indicate whether a company's stock is cheap, fairly valued or expensive. Often, businesses that have these steady underlying businesses are not high growth, and thus the actual best use of capital is to return a portion (usually half) of the earnings to shareholders, and reinvest the other half. 

For the most part, this works out, but at the margins you have companies that have no business paying dividends. Sometimes, stocks sell off so much that the dividend yield becomes very high and becomes a dangerous false positive signal. It is an important component of total return, but should not be solely relied upon.

My most successful investments have provided both dividends *and* capital gains. The best of both worlds. I actually have far more capital gains than dividends, which tends to convince me to stay away from companies that have very high payout ratios (>80%).


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## Eclectic12 (Oct 20, 2010)

mark0f0 said:


> Perhaps I didn't make my point clear. "Balance" is the fact of paying a dividend, in addition to retaining some earnings, in addition to doing some buybacks ...


And what happens to share prices with the "balance" decision is to cut or stop paying dividends?
AFAICT, once dividends start being paid - the most likely course of action for "balance" is to keep the dividends the same instead of raising them.


Regardless, the key criteria for me is not dividends or no dividends but is it an investment I expect to grow in the long term. Worrying too much about dividends being paid has lead at least one here on CMF to overlook that the investment was a bad choice. I don't see how that's any better (or skipping the key players in a sector) than over-valuing dividends.




mark0f0 said:


> ... A rare example amidst the large numbers of income trusts that were dramatically overvalued and only derived their cashflows through vigorous short-term asset stripping.


Not sure it's as rare as you think ... there's other royalty trusts paying the higher tax rates that are still going.


Cheers


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## dogleg1 (Jul 4, 2016)

Unlike O'Leary, some folks here have presented a range of points in favor of more growth oriented investments. O'Leary ,I take it, would not be interested in a fund like MAW104 .


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## TomB16 (Jun 8, 2014)

In my registered accounts, I prefer equities that skew toward dividends. I would rather distribute the money to the best value equities of the moment.

In unregistered accounts, I prefer growth stocks, like everyone else.


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## Eder (Feb 16, 2011)

If you have no other income why wouldn't you want to recieve untaxed dividends in your investment account? It's is free money...


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## gibor365 (Apr 1, 2011)

> In unregistered accounts, I prefer growth stocks, like everyone else.


 I prefer HISA/GIC in non-reg account.... All equties are in registered


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## agent99 (Sep 11, 2013)

Saw this on net. (James will like income section in italics  )

*3 Massive Advantages to Becoming a Dividend Investor*

One of the most fun things about getting rich is that there are an infinite number of ways to get there.

Some folks have built their fortune in real estate. Others have started their own business. The tech world is filled with employees who got handsomely rewarded for taking a chance on a promising start-up. And there are millions of so-called millionaires next door — regular folks who scrimped and saved their way to a very impressive net worth.

Even among stock market investors, there are many different approaches. Some folks will swing for the fences and invest in growth stocks. Value investors are constantly checking 52-week low lists for out-of-favour stocks. Some investors will do nothing but invest in merger arbitrage. And, of course, there are millions of dividend investors out there.

There’s a reason why so many investors have chosen to put their savings to work in Canada’s top dividend-paying stocks. Here are three that are crucially important. They might even change the way you invest.

*Tax breaks*

The dividend tax credit was put into place to encourage Canadian investors to keep their investment dollars at home. This helps stimulate the local economy.

Some smart investors have taken it a step further. If all you report is dividend income, you can earn up to $55,000 per year without paying a nickel of taxes — depending on where you live. Some provinces offer zero taxes on that amount, while others offer steep discounts. Still, no matter where you live, the truth is, dividends are taxed much better than other sources of income, like employment income or interest.

BCE Inc. (TSX:BCE)(NYSE:BCE) is one of Canada’s finest dividend stocks. It’s our nation’s largest telecom with millions of wireless and wired customers. It also owns some of Canada’s best media assets. Shares pay a 4.9% dividend.

It depends on your individual tax situation, but somebody looking to get a 4.9% after-tax yield would need a 7-8% yield on an interest-bearing security. That’s tough to find in 2017.

*Outperformance*

Study after study has proven it. Not only do dividend-paying stocks outperform the market as a whole, but they do so while being less volatile than the overall market. What a fantastic combination.

There are situations where dividend stocks blow up and cut their payouts. That’s inevitable. But investors can protect against that by stuffing their portfolios full of a wide variety of dividend payers.

Take Inter Pipeline Ltd. (TSX:IPL) as an example. The company’s main business is transporting bitumen from the oil sands to refineries close to Edmonton. It also has conventional oil pipelines, natural gas pipelines, and gas-storage facilities. Most of its assets are in Alberta, which is a constantly understated plus. Shares pay a 5.8% dividend.

In the last decade, Inter Pipeline has returned 19.1% per year — assuming dividends were reinvested — while only being 39% as volatile as the market on the whole. Oh, and the price of oil is down approximately 25% in that time.

What a terrific way to invest in such a volatile commodity.

*Income*

_Certain intellectuals are unimpressed with dividends, saying there’s virtually no difference between a company that retains all of its earnings and a company that pays out a dividend In fact, paying a dividend is inefficient because it exposes those earnings to double taxation — once when the profit is earned and once when investors pay their own taxes.

I’m the first to admit those people have a point. But the fact of the matter is that it feels good to get paid every quarter. This feeling matters little to the top minds of finance. They know better. But it matters a great deal to regular folks._

What many investors do is focus on the income. As long as a company continues to meet dividend expectations, it’s easy to avoid selling. Even if the share price languishes.

*The bottom line*

Investors can choose different ways to get rich. Half of the fun is choosing the method. There are so many opportunities out there.

Dividend investing might be the best opportunity of all. It really is that simple.

NOTE: Site I copied from did not cite original source, but it is most likely Motley Fool.


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## stantistic (Sep 19, 2015)

> _Certain intellectuals are unimpressed with dividends, saying there’s virtually no difference between a company that retains all of its earnings and a company that pays out a dividend In fact, paying a dividend is inefficient because it exposes those earnings to double taxation — once when the profit is earned and once when investors pay their own taxes._


In my opinion, this statement is incorrect when applied to dividend paying Canadian corporations and Canadian residents eligible for dividend tax credits.


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## james4beach (Nov 15, 2012)

agent99 said:


> Study after study has proven it. Not only do dividend-paying stocks outperform the market as a whole, but they do so while being less volatile than the overall market. What a fantastic combination.


Less volatile is demonstrably false, an absolute fantasy. During the last bear market the dividend stocks fell exactly as much as everything else _in total return_. During the 2010 flash crash, many dividend stocks vaporized in value for a few minutes.

Many American dividend stocks were by far the worst performers during the bear.


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## Eder (Feb 16, 2011)

Yes its almost like many on this board are unaware of the tax credits.


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## gibor365 (Apr 1, 2011)

james4beach said:


> Less volatile is demonstrably false, an absolute fantasy. During the last bear market the dividend stocks fell exactly as much as everything else _in total return_. During the 2010 flash crash, many dividend stocks vaporized in value for a few minutes.
> 
> Many American dividend stocks were by far the worst performers during the bear.


However, except a couple out of 100 dividend champions continued raising dividends.


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## james4beach (Nov 15, 2012)

gibor365 said:


> However, except a couple out of 100 dividend champions continued raising dividends.


Right, but raising dividends and volatility are different issues. They may have raised dividends, but dividend stocks fell just as hard as all other stocks, even accounting for dividends being paid out (total return).


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## gibor365 (Apr 1, 2011)

james4beach said:


> Right, but raising dividends and volatility are different issues. They may have raised dividends, but dividend stocks fell just as hard as all other stocks, even accounting for dividends being paid out (total return).


Income oriented investors much more concerned about income stream then appreciation...


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## Eder (Feb 16, 2011)

On a pretax basis, dividends have accounted for nearly half (46 percent) of total return for the S&P 500 Index during the past 25 years. So I think some in this thread are incorrect.

Ok, back to only 3% of cerebral power lol.


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## agent99 (Sep 11, 2013)

stantistic said:


> In my opinion, this statement is incorrect when applied to dividend paying Canadian corporations and Canadian residents eligible for dividend tax credits.


So, do you not pay ANY tax on dividends? Most of us do in unregistered accounts. 
And then there is the gross up and OAS clawback. 

If you hold the stock in a registered account there will be tax at full rate when withdrawn.


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## Eder (Feb 16, 2011)

I didn't.


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## gibor365 (Apr 1, 2011)

> If you hold the stock in a registered account there will be tax at full rate when withdrawn.


 Yes, but you pay tax on your income. Usually you withdraw from reg accounts when you don't have other income , so you in a very low bracket


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## agent99 (Sep 11, 2013)

james4beach said:


> During the last bear market the dividend stocks fell exactly as much as everything else _in total return_.


Maybe you explain this with an example. For example, take a stock like Royal Bank in 2005 and then in 2010 to bracket the 08/09 crash. So far as I recall, they kept paying and likely increased their dividend. Total return for that period was 16.36% so an investor would have more than doubled their investment. How did "everything else" do?

It may be true (and not surprising) that the RY stock price dropped as much as the tsx index (largely financials) right at time of crash. But if you compare from point before crash to one after recovery, you will find that at least this dividend stock beats the TSX index hands down.

https://ca.finance.yahoo.com/chart/...pbmVDb2xvciI6IiM0NWUzZmYiLCJyYW5nZSI6Im1heCJ9


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## agent99 (Sep 11, 2013)

gibor365 said:


> Yes, but you pay tax on your income. Usually you withdraw from reg accounts when you don't have other income , so you in a very low bracket


That's not really true. Most people have CPP/OAS/Pensions and money in their unregistered accounts. The RRIF withdrawal is considered income too. In the end many end up in higher tax bracket when they reach RRIF withdrawal stage. (Believe me, I am there!)


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## james4beach (Nov 15, 2012)

agent99 said:


> Maybe you explain this with an example. For example, take a stock like Royal Bank in 2005 and then in 2010 to bracket the 08/09 crash. So far as I recall, they kept paying and likely increased their dividend. Total return for that period was 16.36% so an investor would have more than doubled their investment. How did "everything else" do?


The question was volatility, not long term performance. Look at a period that straddles the crash: 2008-01-01 to 2010-01. The numbers are total returns.

XIU (the broad market) fell as much as -42% and ended -10.5%
RY: fell as much as -46% and ended +21.7%
BCE: fell as much as -46% and ended -20.3%
MFC: fell as much as -76% and ended -48.7%
T: fell as much as -37% and ended -24%

Those are some major dividend players. They fell as much as the broad market (i.e. they are as volatile as the broad market) and some performed better, some performed worse than the broad market when all is said and done.


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## Eder (Feb 16, 2011)

james4beach said:


> The question was volatility, not long term performance. Look at a period that straddles the crash: 2008-01-01 to 2010-01. The numbers are total returns.
> 
> XIU (the broad market) fell as much as -42% and ended -10.5%
> RY: fell as much as -46% and ended +21.7%
> ...


Lets try your 2008 Jan1 till today since we live & invest in the present?

XIU (the broad market) fell as much as -42% and ended +44%
RY: fell as much as -46% and ended +183%
BCE: fell as much as -46% and ended +135%
MFC: fell as much as -76% and ended -17%
T: fell as much as -37% and ended +156%


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## gibor365 (Apr 1, 2011)

agent99 said:


> That's not really true. Most people have CPP/OAS/Pensions and money in their unregistered accounts. The RRIF withdrawal is considered income too. In the end many end up in higher tax bracket when they reach RRIF withdrawal stage. (Believe me, I am there!)


Probably it depends on situation 
I have RRSP and SRRSP, both sheltered us from a very high tax bracket. In 2 years (age 52), I will be fully retired (no working income) and will convert RRSPs to RRIFs. will start to take RRIFs minimums and even together with un-reg HISAs/GICs (depends on the year , I can increase RRIFs withdrawals) ,I will be in low tax bracket. CPP and OAS I can always defer to later ... and even if I start at 65, i will be already withdrawing from RRIFs for 13 years...


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## agent99 (Sep 11, 2013)

James, EVERYTHING dropped at end of 2008 over a very short period due to *abnormal* market conditions. RY actually dropped less and recovered quicker than the overall market. 

Volatility is normally measured during normal trading conditions and over an extended period. Most blue chip stocks follow the general market trend and volatility.

I don't see a problem if a stock price has higher volatility yet still grows in value and pays an ever increasing dividend. Volatility can be a sign that there IS a market for the stock. A stock with very low volatility may just have very little volume over the measured period. In other words, volatility is not much of a metric in choosing a stock.


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## stantistic (Sep 19, 2015)

*Home perms and toothpaste*

This thread of capital gains vs dividends reminds me of TV commercials from the sixties where "twins" debated the intrinsic properties of a given product.


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## Eclectic12 (Oct 20, 2010)

agent99 said:


> Maybe you explain this with an example. For example, take a stock like Royal Bank in 2005 and then in 2010 to bracket the 08/09 crash. So far as I recall, they kept paying and likely increased their dividend ...


No need speculate ... according to Yahoo's historical listings for Royal Bank:
Jan 2005 to Jan 2006 had two dividend increases.
Then a 2:1 stock split, where the next dividend is another dividend increase.
July 2006 to Oct 2007 has another three dividend increases.
Nov 2007 to Dec 2010 has dividends on schedule but no dividend increases.

Bank of Nova Scotia, in comparison had:
Jan 2005 to Jun 2008 ... seven dividend increases.
July 2008 to Dec 2010 ... on schedule dividend payments, no increases.


Cheers


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## canew90 (Jul 13, 2016)

james4beach said:


> Right, but raising dividends and volatility are different issues. They may have raised dividends, but dividend stocks fell just as hard as all other stocks, even accounting for dividends being paid out (total return).


One might ask, did the non div payers grow faster or more after the crisis? I doubt it and for those receiving dividends and even increases, reinvesting them bought a lot more shares, compounding their growth.


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## james4beach (Nov 15, 2012)

canew90 said:


> One might ask, did the non div payers grow faster or more after the crisis?


What you're talking about (total return) is a different matter than volatility. The dividend payers in Canada probably performed better after the crisis years - yes.



> for those receiving dividends and even increases, reinvesting them bought a lot more shares, compounding their growth.


That dividend (cash) originally came out of the company's value, from their Retained Earnings. It's not free money.

For example, if Berkshire Hathaway suddenly started paying dividends, your total return on the stock would not increase, even if you use those dividends to buy more BRK shares.


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## TomB19 (Sep 24, 2015)

If I have a stock that has done well such that present value nears the future value, why would I buy more of that stock? To do so would be counter to the philosophy of value investing. I might be happy to own it and excited about the performance but I wouldn't want to extend the position

As distributions come in, I buy the best value stock with them. Sometimes,I buy stock that I had not previously held.

When a stock does not distribute, I do not have the opportunity to reallocate capital to the equity with the best performance. I've seen the inner workings of two listed corporations during good times. In both cases, capital was being aggressively reinvested in executive travel and bonuses.

My first mortgage was purchased because equities were super high at the time. Back then, I was only interested in three stocks, gics, and bonds.

Profit should belong to the owners. They should have the choose of what they want to do with their money.


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## james4beach (Nov 15, 2012)

TomB19 said:


> As distributions come in, I buy the best value stock with them. Sometimes,I buy stock that I had not previously held.
> 
> When a stock does not distribute, I do not have the opportunity to reallocate capital to the equity with the best performance.


Sure you have the choice. You can sell shares at any time and buy any other asset.

If you're positive that A provides a better risk/reward proposition than B, why on earth would you not shift money from B to A ?


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## mordko (Jan 23, 2016)

A question... XIC has its day of record in December but distribution payment in Jamuary. T3 was issued for 2016 with the date against distribution on January 5th of 2017. In what year are these distributions taxable? Assume 2016...


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## Eclectic12 (Oct 20, 2010)

^^^

This question came up in http://canadianmoneyforum.com/showthread.php/110914-Dividend-Timing-for-Tax-Year-Purposes.

After checking, I found XIC payments as late as Jan 15th the following year that were recorded on the previous year's T3 (i.e. paid Jan 15th 2016 means the payment was included in the 2015 T3 form).

If you read the details closely enough, Tax Tips provides a note that says the same thing.
http://www.taxtips.ca/personaltax/in...tment/etfs.htm


Cheers


*PS*

The place it might matter is if one is estimating the T3 income from broker statements instead of waiting for the T3 form or using the ETF provides published breakdown AFAICT.


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## canew90 (Jul 13, 2016)

james4beach said:


> What you're talking about (total return) is a different matter than volatility. The dividend payers in Canada probably performed better after the crisis years - yes.
> 
> 
> 
> ...


Accept by rreinvesting gets more shares and the next time div's are paid you receive more income, regardless if those shares are up or down and it continues to increase. With no div paid, you get no return unless you sell those shares and the value at that time may or may not be up. Certainly its not free money, but one has the choice to do with as one chooses, reinvest, buy other stocks or keep the cash. with no div there is no choice but to sell shares to get cash.


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## agent99 (Sep 11, 2013)

canew90 said:


> Accept by reinvesting gets more shares and the next time div's are paid you receive more income, regardless if those shares are up or down and it continues to increase. With no div paid, you get no return unless you sell those shares and the value at that time may or may not be up. Certainly its not free money, but one has the choice to do with as one chooses, reinvest, buy other stocks or keep the cash. with no div there is no choice but to sell shares to get cash.


What James keeps saying is *theoretically* correct. If the same company pays a dividend from earnings or instead retains the earnings in the company *at some point in time*, there should be no difference in the value of the company to a shareholder - at that point in time.

If we get the dividend in our hands, we can decide how to use that dividend. If the company retains the earnings, we are in their hands as to how they invest the earnings. Do they invest it wisely so as to grow the company or do the management pay them selves ever increasing amounts or put up a new non-revenue producing office building or... and the list goes on. 

Over a period of time, external or internal events can change the value of a stock. Most companies hold their dividends steady. Those that say selling of shares instead of collecting dividends are equivalent are simply wrong because all markets are volatile. Having to sell shares at lows, would not be not fun.

Paying dividends at least lets shareholders share on an on-going basis in the success of the company while in part still enjoying the growth (assuming management don't fritter away the earnings!)

There are many other reasons to buy solid dividend stocks over growth stocks, but we have been through all of this before.... The article I posted upthread (#20) covers the subject well.


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## Nelley (Aug 14, 2016)

agent99 said:


> What James keeps saying is *theoretically* correct. If the same company pays a dividend from earnings or instead retains the earnings in the company *at some point in time*, there should be no difference in the value of the company to a shareholder.
> 
> If we get the dividend in our hands, we can decide how to use that dividend. If the company retains the earnings, we are in their hands as to how they invest the earnings. Do they invest it wisely so as to grow the company or do the management pay them selves ever increasing amounts or put up a new non-revenue producing office building or... and the list goes on.
> 
> ...


Exactly-you could make the same THEORETICAL argument that by lowering management renumeration and reinvesting the saved funds, the company would prosper and eventually pay more to management-see what they think of that reasoning.


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## Pluto (Sep 12, 2013)

dogleg1 said:


> If we listened to Kevin O'Leary we would only select investments that primarily yield dividends over capital gains. What arguments should we make for one versus the other?


I don't think he shuns capital gains, he has just become more conservative over time. Growth strategies can be quite volatile and take more attention to manage. 

He often tells the story of his mother who bought shares in companies that raised dividends over 50 years. Rising dividends can mean that your yield ends up being 20 - 30% or more of your origional cost for the stock. buy that time one will have a significant paper capital gain as well. And buying these stalwarts means you may never have to sell due to poor performance. 

In contrast the growth strategy would likely require nimble trading, active manegment, which as we know, is more difficult than it looks.


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## Nelley (Aug 14, 2016)

Pluto said:


> I don't think he shuns capital gains, he has just become more conservative over time. Growth strategies can be quite volatile and take more attention to manage.
> 
> He often tells the story of his mother who bought shares in companies that raised dividends over 50 years. Rising dividends can mean that your yield ends up being 20 - 30% or more of your origional cost for the stock. buy that time one will have a significant paper capital gain as well. And buying these stalwarts means you may never have to sell due to poor performance.
> 
> In contrast the growth strategy would likely require nimble trading, active manegment, which as we know, is more difficult than it looks.


EVERYBODY wants capital gains-the reality is that a stock chart is not a reliable predictor of the future-it is a historical record-that fact is lost on many.


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## Eder (Feb 16, 2011)

Pluto....pointing out dividend growth strategy successes by referring to "Yield on Cost" will only upset many posters here...shhh!


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## dogleg1 (Jul 4, 2016)

This is slightly off course from my original question about dividends versus capital gains but kind of the same. My brother's boy asked me about the advisability of buying BCE mainly for its fairly consistent 5% dividends as opposed to buying an ETF dividend (index)fund. I guess he needs to decide if he wants to trust the individual, stock investment or opt for the diversity of the ETF. Giving financial advice is risky ...at least that is how I always feel about it.


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## james4beach (Nov 15, 2012)

Why would a young person need the dividend? Presumably they will be reinvesting that dividend to achieve the best possible total return and growth. And once you're reinvesting your dividends, you might as well buy any standard stock index.

This is something I will never get: people go looking for "high dividend stocks", only to DRIP the dividends.


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## Nelley (Aug 14, 2016)

james4beach said:


> Why would a young person need the dividend? Presumably they will be reinvesting that dividend to achieve the best possible total return and growth. And once you're reinvesting your dividends, you might as well buy any standard stock index.
> 
> This is something I will never get: people go looking for "high dividend stocks", only to DRIP the dividends.


You don't get it because you aren't willing to learn anything. You keep saying the same old B/S about the accounting nature of dividends-something your grade school teacher taught you-which is irrelevant-the investor is not the company.


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## humble_pie (Jun 7, 2009)

Nelley said:


> You don't get it because you aren't willing to learn anything. You keep saying the same old B/S about the accounting nature of dividends-something your grade school teacher taught you-which is irrelevant-the investor is not the company.




stumbled on this & burst out laughing. It's vintage nelley .each:

nelley the accuser. Nelley the insult monger. Nelley the hangwoman.

hey nell this is a finance forum, remember? were you having anything to contribute? now or ever?



.


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## OnlyMyOpinion (Sep 1, 2013)

I agree, James is dug in on this one, but we all have our opinions - that's why we're here.

As I'd posted ages ago somewhere, we had our kids invested in some dividend paying companies early on to educate and cultivate an interest in investing and the value of your money. Owning Bell, Telus, TD, Tim Hortons or Cineplex was more meaningful than owning xic, zut or zit. 

Want a cell phone? How much does it cost you per month? How much do you have to save and invest in BCE for them to 'pay your bill' with dividend income? 
Don't like the lineup at Tim's or Starbucks? Own their stock and you'll enjoy waiting in line knowing all these people are helping the company pay you a dividend.
Now that they are older they've moved to diversified CCP portfolios but still own a half dozen of the usual blue chips..

(BTW, you'd have to own ~230 shares at a cost of $13,616 to get dividends of $662/yr to cover a $55/mo Bell cellphone bill.)


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## peterk (May 16, 2010)

james4beach said:


> Why would a young person need the dividend? Presumably they will be reinvesting that dividend to achieve the best possible total return and growth. And once you're reinvesting your dividends, you might as well buy any standard stock index.
> 
> This is something I will never get: people go looking for "high dividend stocks", only to DRIP the dividends.


Some young person in money diaries just recently said that dividends and income are even _more_ important to them than net worth increases... *shrugs*

Overall I guess there's worse things, since yield chasing often leads to making purchases at relatively low P/E, and good total returns, so long as the yield they're chasing is 5%, not 10%. It also encourages making regular purchases, and not panic selling because "the dividend keeps paying".

Really someone who doesn't take any effort to learn and just wants to "collect muh dividends" ends up following a fairly robust stock selection and investor behavior strategy.


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## Eaglyeye (Mar 21, 2017)

OnlyMyOpinion said:


> I agree, James is dug in on this one, but we all have our opinions - that's why we're here.
> 
> As I'd posted ages ago somewhere, we had our kids invested in some dividend paying companies early on to educate and cultivate an interest in investing and the value of your money. Owning Bell, Telus, TD, Tim Hortons or Cineplex was more meaningful than owning xic, zut or zit.
> 
> ...


So basically 55/month return for a 13k investment plus the growth within the stock price , that is not bad compared to the 5.09/month (with the same amount) that i get from my TFSA savings account . Wonder if i should rethink where to put my money into.


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## humble_pie (Jun 7, 2009)

Eaglyeye said:


> So basically 55/month return for a 13k investment plus the growth within the stock price , that is not bad compared to the 5.09/month (with the same amount) that i get from my TFSA savings account . Wonder if i should rethink where to put my money into.



don't forget the dividend tax credit, it'll lower your tax owing. That's a big plus.

.


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## OnlyMyOpinion (Sep 1, 2013)

Eaglyeye said:


> So basically 55/month return for a 13k investment plus the growth within the stock price , that is not bad compared to the 5.09/month (with the same amount) that i get from my TFSA savings account . Wonder if i should rethink where to put my money into.


Hide, I think I see James coming. :boxing:


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## Eaglyeye (Mar 21, 2017)

OnlyMyOpinion said:


> Hide, I think I see James coming. :boxing:


Haha read many of his posts and gained so much knowledge from them , but still not sure why he is so not a fan of the dividend stock holdings . Just came across the below from one of the posts in money diaries , although not thinking too far ahead but look at the earnings and he is right its basically FREE MONEY (all the dividends earned). In a way going in with the dividends teaches you some discipline with investing . 

TFSA- $85,740
RRSP- $90,451
Savings- $45,265 (moved $5,500 to TFSA)
Pension- $174,080
JAN total = $394,438. Month over month increase of $18,120 or 4.80%

Total Dividends I received in January was $639.12

Total yearly dividends to date is $639.12



Year Total Dividends Received
2014 $2,421.00
2015 $4,169.00
2016 $6,192.86
2017 $639.12
2018
2019
2020
Total $13,421.98 of free money


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## humble_pie (Jun 7, 2009)

.
sometimes jas4 is a bit fanatic on this topic. He argues that the total worth of a company drops by the aggregate amount of the dividends to be paid as of each X date, therefore a dividend payout diminishes the corporate treasury. Jas4 says that a 58 penny dividend means exactly the same whether it's left with the company or whether it's paid out to an investor.

many have responded with wise counter-commentaries, so i'll not repeat these here. 

(laughter) i'll just repeat my own counter. Tis not wise, tis a poor thing (so sorry) but tis the best that i can do.

i ask myself, if we are going to view a dividend payout as nothing more than a cash transfer, why not move completely to a cash flow analysis? every time a company pays a bill or a fine or sells a product, is a cash event that should move the market price exactly the same way a dividend distribution should (says jas4) move the market.

except reality doesn't work like that. Reality doesn't give a fig about numbers-happy analysts staying up all night to crunch spreadsheets. Reality says a corporation is a living organism. It has earnings, quality of management, geopolitical news, loss of clients, mergers, takeovers, new clients, gains in product sales, cuts in costs, even windfall profits.

institutional investors usually like it when a company grows old enough & big enough to settle down & pay a regular dividend. The dividend becomes a tiny antenna to the corporate board room.


.


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## OnlyMyOpinion (Sep 1, 2013)

Whoa _Nelley_ (where are you - oh, defending Trump, ok carry on), so as not to gang up on James, let me come to his defense a bit:

The point to remember is Total Return - that includes dividends and capital growth.
When you are younger and building your net worth (accumulating), it would be a mistake to be invested only in a staid dividend payor whose stock value does not increase with time. The dividend might be higher than others and seem like a good deal, but over the years you will not do as well as a company that has a more modest dividend but is growing share value as well.

Later, once you are finacially independent and focused on having your portfolio provide an income (decumulating), you may choose to tilt more towards income (dividends) than growth. (Others point out you could just sell shares rather than tilt towards dividends. The counter to this is that you don't want to sell in a down market. It is difficult to generalize since everyone's situation is unique.)

As always, I think diversity and moderation are good. A stock idex etf by definition does have a mix of staid and growth so remains a good solution. Nothing wrong with some individual dividend payors as well, especially when your portfolio grows larger. Which you add first is a choice - but remember as they say,"it is time in the market, not timing the market" that builds wealth. So spending your first 10 years with no share growth but decent dividends would be a mistake IMO.

The past ~10 years of declining interest rates have no doubt had an influence in growing the share value of previously staid dividend payors (market demand for dividends). So how they perform if the future 10 years see a gradual increase in interest rates is a ? Their share value growth may flatten. Which makes diversity and broad market exposure even more important.

As pointed out, the dividend tax credit is attractive for non-sheltered accounts. Of course it's tax treatment is subject to the whims of gov't. So letting the tax tail wag your investment dog is not recommended - do what makes sense investment-wise while optimizing taxes as best you can (I'm not insulting _new dog_ here).


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## Nelley (Aug 14, 2016)

OnlyMyOpinion said:


> Whoa _Nelley_ (where are you - oh, defending Trump, ok carry on), so as not to gang up on James, let me come to his defense a bit:
> 
> The point to remember is Total Return - that includes dividends and capital growth.
> When you are younger and building your net worth (accumulating), it would be a mistake to be invested only in a staid dividend payor whose stock value does not increase with time. The dividend might be higher than others and seem like a good deal, but over the years you will not do as well as a company that has a more modest dividend but is growing share value as well.
> ...


OH-now I get it-we want a great TOTAL RETURN-we weren't aware of that nugget of wisdom-thanks for clueing us in.


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## Eclectic12 (Oct 20, 2010)

OnlyMyOpinion said:


> Whoa _Nelley_ (where are you - oh, defending Trump, ok carry on), so as not to gang up on James, let me come to his defense a bit:
> 
> The point to remember is Total Return - that includes dividends and capital growth.
> When you are younger and building your net worth (accumulating), it would be a mistake to be invested only in a staid dividend payor whose stock value does not increase with time ...


Trouble is ... something like 80% plus of the invest *pays* dividends.

Throw in that the index total return < gold < top end dividend payers that are typically described as "staid" or "conservative".


IMO ... if dividends don't matter - one should have as first priority whether the investment is good or not. 




OnlyMyOpinion said:


> ... A stock idex etf by definition does have a mix of staid and growth so remains a good solution.


If this is true, one wonders why there's a statement like "you might as well buy any standard stock index" while there are also experiments to get away from the "crowded trade" space.


Cheers


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## agent99 (Sep 11, 2013)

OnlyMyOpinion said:


> (BTW, you'd have to own ~230 shares at a cost of $13,616 to get dividends of $662/yr to cover a $55/mo Bell cellphone bill.)


I like that approach 

In the days of Income Trusts, I owned a lot of energy units. They paid our energy bills. When the oil price went sky high and we had to pay more at the pumps, I didn't worry too much about it  By the way, made good capital gains on some of those trusts too by selling some off when they reached highs.


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## Eder (Feb 16, 2011)

Good businesses tend to start paying dividends early and to increase them frequently. This has never precluded growth. 
And there's your screener.


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## hboy54 (Sep 16, 2016)

Hi:

James is entirely correct in his assertions regarding dividends. Nothing magical here, just a transfer of cash from the corporate balance sheet to your personal one. $40 share price one day equals $39 share price plus $1 dividend the next theoretically in the absence of other factors. If this were not true, then why not pay out $1000 in dividends to have $40 share price plus $1000 dividends the next day?

Everyone else is also correct in asserting "other factors" that turns to mush the theoretical equivalency of the two positions. There is all kinds of irrationality displayed by the investing public. If someone is happier with a total return of 6% made up of 4% dividend and 2% capital gain as opposed to say 8% capital gain and zero dividend, well to each his own.

What I don't understand is the desire to so energetically fight and win these sorts of arguments. Sure, make a case in the interests of searching for truth, public service and all, but at some point isn't one's time better spend exploiting one's personal "better" understanding of the truth than other investors with all their "false notions"? Personally, I am quite happy to get the returns I get, and leave others to be the holders of investing truth and beauty.

hboy54


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## Nelley (Aug 14, 2016)

hboy54 said:


> Hi:
> 
> James is entirely correct in his assertions regarding dividends. Nothing magical here, just a transfer of cash from the corporate balance sheet to your personal one. $40 share price one day equals $39 share price plus $1 dividend the next theoretically in the absence of other factors. If this were not true, then why not pay out $1000 in dividends to have $40 share price plus $1000 dividends the next day?
> 
> ...


Einstein: What you are stating would be accurate if you possessed a CRYSTAL BALL which accurately predicts future equity prices. You are comparing apples to oranges-the whole point of dividends is the high likelihood of payment. Everybody wants to maximize return-if it were as simple as looking at a chart or giving your money to Mawer that would be nice.


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## agent99 (Sep 11, 2013)

Eclectic12 said:


> Trouble is ... something like 80% plus of the invest *pays* dividends.


I have some trouble understanding why anyone would discourage buying dividend payers but recommend an ETF like XIU. XIU of course holds many dividend payers and on average has paid about 2.5-3% in dividends (my guess). It would be interesting to compare Total Return of XIU (and XIC) since inception with and without those stocks that pay dividends of 2.5- 3% or more.


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## like_to_retire (Oct 9, 2016)

hboy54 said:


> There is all kinds of irrationality displayed by the investing public. If someone is happier with a total return of 6% made up of 4% dividend and 2% capital gain as opposed to say 8% capital gain and zero dividend, well to each his own.


Agreed, but once a company becomes established, I like to see a dividend paid. When a company is awash in cash it affords them an opportunity to spend it unwisely and so that capital gain we like to see doesn't materialize, usually as a result of foolish investments or too large management compensation. I would rather see that extra cash in my pocket. I feel I can do a nice job of investing it rather than have a company waste it. I think a dividend keeps a company honest. They know they have to come up with that pesky dividend every quarter, and they know the penalty for reducing that dividend.

I like dividend payers. Common stock dividend payers with no less than 1.25% and never more than 5%. That's my silly rule. It's worked for me. I've handily beat the TSX60 for the last 11 years since I've been keeping tight records.

ltr


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## james4beach (Nov 15, 2012)

hboy54 said:


> James is entirely correct in his assertions regarding dividends. Nothing magical here, just a transfer of cash from the corporate balance sheet to your personal one. $40 share price one day equals $39 share price plus $1 dividend the next theoretically in the absence of other factors. If this were not true, then why not pay out $1000 in dividends to have $40 share price plus $1000 dividends the next day?
> 
> Everyone else is also correct in asserting "other factors" that turns to mush the theoretical equivalency of the two positions. There is all kinds of irrationality displayed by the investing public. If someone is happier with a total return of 6% made up of 4% dividend and 2% capital gain as opposed to say 8% capital gain and zero dividend, well to each his own.
> 
> What I don't understand is the desire to so energetically fight and win these sorts of arguments.


Good points. But the reason I am loud about all this is because it can cause harm, if fixation on dividends leads you to:

1. massively skew your sector balance, like XDV
2. chase high yielding stocks that are otherwise not good investments
3. make incorrect projections about your retirement savings
4. pay excessive fees in a dividend fund/ETF for zero gain
5. take excessive risk in stocks and expose you to retirement disasters
6. invest in vehicles like XTR which are entirely dividend deception tricks


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## james4beach (Nov 15, 2012)

I should add, many investors around here aren't making any of those ^ mistakes I listed. But the regulars of this forum tend to be very astute investors.


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## Eclectic12 (Oct 20, 2010)

hboy54 said:


> ... There is all kinds of irrationality displayed by the investing public. If someone is happier with a total return of 6% made up of 4% dividend and 2% capital gain as opposed to say 8% capital gain and zero dividend, well to each his own.


That's where for some people, just getting a total return of 6%, no matter how it is made up would be a big improvement versus at total return of 0.6%.




hboy54 said:


> ... What I don't understand is the desire to so energetically fight and win these sorts of arguments. Sure, make a case in the interests of searching for truth, public service and all, but at some point isn't one's time better spend exploiting one's personal "better" understanding of the truth than other investors with all their "false notions"?


Part of the problem on both sides IMO is dropping factors or ignoring nuances. 

I suspect part of the problem is that there's probably not going be many (or any) that are going to post about how they see things differently ... just like few mention that they have some lagging investments, losses, bad indexes or badly timed precious metals purchases. :biggrin:


Cheers


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## bgc_fan (Apr 5, 2009)

james4beach said:


> Why would a young person need the dividend? Presumably they will be reinvesting that dividend to achieve the best possible total return and growth. And once you're reinvesting your dividends, you might as well buy any standard stock index.
> 
> This is something I will never get: people go looking for "high dividend stocks", only to DRIP the dividends.


Well, for my 2 cents I bought a bunch of stocks in university and DRIPed them. Not having much money I doubt I spent more than a few hundred per stock over the course of a few years. Right now other than some stocks that privatized and cashed out, or Nortel going bankrupt, the portfolio has increased 5 fold over the past 17 years. Some of it was timing, i.e. Telus near historic lows, but I haven't really been active and allowed the dividends accumulate.


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## agent99 (Sep 11, 2013)

I came across this site: https://www.topyields.nl/

Great spot to research dividend stocks. Covers Canada and many other countries. Also allows results to be displayed for etfs, indexes, etc. 

I was interested in how many in TSX60 paid dividends as well as ow much. It gave this result:
https://www.topyields.nl/tsx60-best-dividend-stocks/ as well as this for Canadian ETFs:
https://www.bestdividendetfs.com/domicile/ca/1.html


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## Pluto (Sep 12, 2013)

james4beach said:


> Why would a young person need the dividend? Presumably they will be reinvesting that dividend to achieve the best possible total return and growth. And once you're reinvesting your dividends, you might as well buy any standard stock index.
> 
> This is something I will never get: people go looking for "high dividend stocks", only to DRIP the dividends.


1. why would one need a dividend? For the same reason that one would need a capital gain if the stock did not pay a dividend. For the same reason that when you buy bonds, you want interest payments. do you reinvest interest payments? If you think reinvesting dividends makes no sense, why would your reinvest interest from bonds? Lots of dividend paying stocks have capital growth as well as rising dividends. 
2. You might as well buy a standard stock index. Nope. Because you endup having to buy lower quailty stocks in the index. Just pick the quality issues individually.
3. You might make your point more concretely if you provide a list of non-dividend paying stocks that meets reasonable goals for capital growth. Otherwise your critique is too abstract for people.


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## AltaRed (Jun 8, 2009)

It's actually Total Return that ultimately matters...however that is done. And to get good TR on a sustained basis, one needs to have a good ROE (return on equity in particular).

One thing I take exception to is the 'blanket' statement that buying a standard stock index results in having to buy lower quality stocks as well as the good ones. The issue is there are a lot of surprise stocks in an index that were not foreseen in the first place either and they often negate the losers. Very little of that is known in advance.


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## james4beach (Nov 15, 2012)

I think as long as someone is checking up on total return, they're good. No problem with emphasizing dividends if you enjoy getting those cash payments.

CDZ for example has outperformed the TSX index over the last 10 years, by quite a bit. I do not fault anyone for investing in CDZ with its dividend focus. I'd buy it myself, not due to the dividends but because it has a strong total return and a great sector balance.


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## james4beach (Nov 15, 2012)

Some longer term CDZ figures, while I'm at it.

Since inception on 2006-09-08, CDZ has returned 7.03% annually. In comparison, using the iShares charting tool, XIU returned +81.2% over 10.57 years. That's an annual return of 5.8%.

This means CDZ (assuming reinvested dividends) has outperformed XIU by about 1.2% per year since inception. Quite impressive, despite its higher MER.


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## Oldroe (Sep 18, 2009)

Now you see how James has turned Canadian bank div. into chasing crazy div. from bad stocks.


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## hboy54 (Sep 16, 2016)

Nelley said:


> Einstein:


Here we have someone so busy basking in the glow of his own brilliance, that the point that I assume others get because I assume a certain level of intelligence, a certain ability to generalize from an arbitrary example to the general principle without writing a book, was missed. oh well. Like I said, I don't need to win here. I leave you with your "truth" while I just carry on.

hboy54


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## hboy54 (Sep 16, 2016)

Hi:

For the record, I like dividends. Only two of my holdings do not currently pay a dividend, and they have in the past. My long term goal is to have a portfolio yield of 3 to 3.5% for many of the reasons listed above by others. I just don't assign any special magic to dividends.

Why is my yield currently under target? That would be because I pursued hard other opportunities that either don't pay a dividend, or which payment has been drastically reduced. It is early yet, only about 2 years since I went down this path, but so far so good.

I see dividends as a lower "financial entropy" return and keeping the cash in the company as high entropy. With a dividend, I can spend it on toys, buy another company, buy more of the same company, or pay down debt. A dividend is like electrical energy, it easier converts to other things with high efficiency. Keeping the money in the company by not paying a dividend is like heat energy. Sure, it converts to other things too, but not as easily or efficiently - you have to sell some shares, (in which company?, on which date?), and pay the $10 commission.

hboy54


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## OnlyMyOpinion (Sep 1, 2013)

hboy54 said:


> Here we have someone so busy basking in the glow of his own brilliance, that the point that I assume others get because I assume a certain level of intelligence, a certain ability to generalize from an arbitrary example to the general principle without writing a book, was missed. oh well. Like I said, I don't need to win here. I leave you with your "truth" while I just carry on.
> hboy54


Sorry Hboy, that was probably my fault for calling Nelley over from the Trump thread. I should have left the old horse over there, masticating and farting where her lack of contribution isn't as obvious. Never has anything useful to say, but no one has the heart to send her off to the glue factory yet.


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## hboy54 (Sep 16, 2016)

james4beach said:


> Good points. But the reason I am loud about all this is because it can cause harm, if fixation on dividends leads you to:
> 
> 1. massively skew your sector balance, like XDV
> 2. chase high yielding stocks that are otherwise not good investments
> ...


Yes, but why is it your personal mission to school everyone? I think it is likely you spend more hours studying and writing about investing than any other person on this forum. You are in your 30s. I can't help thinking you should be occupying yourself elsewhere. I spent my youth, as I came to realize too late, unwisely in many ways. I don't wish the same fate on you.

hboy54


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## humble_pie (Jun 7, 2009)

AltaRed said:


> One thing I take exception to is the 'blanket' statement that buying a standard stock index results in having to buy lower quality stocks as well as the good ones. The issue is there are a lot of surprise stocks in an index that were not foreseen in the first place either and they often negate t. he losers. Very little of that is known in advance.




a lot of work has been done in this forum, over several years (even before you arrived, altaRed!) to show that a curated list of an index's best performers will tend to outperform the index itself.

the prize-winning leanest curated list belongs to Eder. For years, he's managed a grand total of three common stocks in his daughter's account. I do believe she's managing everything on her own now, but my impression from Eder's posts is that he funded & set up her account for her a number of years ago, when she was a student.

apart from being a fine example of parent-child transmission of financial knowledge, eder's triad has flourished famously. His picks - again as best i can recall - were BCE, royal bank plus i believe the 3rd was CN rail.

argonaut with his 5-pack is a well-known prophet of the don't-buy-the-index school. Close behind comes jas4beach, who keeps experimenting with formulas that will curate an index list so as to deliver outperformance by the selected few.

it's worth noting that all successful curated lists ever discussed in cmf forum have used extensive backtesting to discover which, among an index's total holdings, have been the outperformers & why. Jas4 is a wizard at this, as we all know. Eder i imagine does not backtest so extensively, but on the other hand BCE, RY & CN are famous the world over as strong bell-wether canadian stocks, so it has been pretty safe to embrace them these past 9 years.

i have a kind of curated canadian stock list myself. Not only are the underlying stocks chosen because they are large, stable outperformers with long histories, but they also have to have liquid option markets either in canada or in the US. For years this meant no REITs for me, because there are no decent options in REITs. But here in cmf forum, i was lucky enough to learn more about REITs from various knowlegeable posters including altaRed, so now i am the proud owner of 2 in the TFSA (dream global & more recently CAR.)


.


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## humble_pie (Jun 7, 2009)

OnlyMyOpinion said:


> Sorry Hboy, that was probably my fault for calling Nelley over from the Trump thread. I should have left the old horse over there, masticating and farting where her lack of contribution isn't as obvious. Never has anything useful to say, but no one has the heart to send her off to the glue factory yet.



the old gray mare, she
ain't what she used to be

:barbershop_quartet_


.


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## agent99 (Sep 11, 2013)

hboy54 said:


> Yes, but why is it your personal mission to school everyone? I think it is likely you spend more hours studying and writing about investing than any other person on this forum. You are in your 30s. I can't help thinking you should be occupying yourself elsewhere.
> hboy54


I don't see a big problem if James wants to spend his time learning and reading about investing. 

But he is young and at the stage that a boss once described to me as the "arrogance of youth" . I was darned good at what I did and at times frustrated that others did not share my views. James may be at that stage  Here at CMF, we are all at different stages in life and what James may think is "right" may not be "right" for many others. It is clear from this forum that many have different views on things he has strong views about. This link is amusing and maybe appropriate!

As I approached retirement, after spending my earlier years working hard with very little interest in investments, I found that our full service broker and bank were fleecing us with high fees and trading costs. I needed a crash course so I could do my own investing! Read the Wealthy Barber, then found someone on-line who, like James, had decided to learn all he could about investing (http://www.telusplanet.net/public/kbetty/) Investing was not his field, but he is a bright guy and produced some very useful guides for the neophyte investor. He never tried to forcefully impart his views on the reader. Just provided good information to use as you wished. It was oriented toward retirement, but also has more general financial information. This is his updated link.

James - maybe you could tone it down a little. Suggest things rather than try and educate. And bear in mind the diverse audience your posts may have. But keep it up! The forum would be dead without your input!


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## AltaRed (Jun 8, 2009)

humble_pie said:


> a lot of work has been done in this forum, over several years (even before you arrived, altaRed!) to show that a curated list of an index's best performers will tend to outperform the index itself.
> 
> the prize-winning leanest curated list belongs to Eder. For years, he's managed a grand total of three common stocks in his daughter's account. I do believe she's managing everything on her own now, but my impression from Eder's posts is that he funded & set up her account for her a number of years ago, when she was a student.
> 
> ...


I don't doubt that backtested lists of stocks generally outperform the index but it is unkind to Couch Potato investors to denigrate the value of index investing by saying indices contain a lot of crap. They also contain a number of surprise stocks which would have never made it to a curated list in the first place. IOW, there are mitigative measures to losers that by definition are in indices. Few people are actually cut out to be stock pickers and to stay the course, and for them careful selection of backtested rules based ETFs can also perform admirably well. 

As an example, I am a stock picker in the Cdn markets and am pleased with the peformance of my stocks in aggregate against the market. At the same time, I've advised and steered my ex to broad based ETFs because she has no interest in managing a stock portfolio. It simply is not fair to pick on indexers.


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## Eclectic12 (Oct 20, 2010)

AltaRed said:


> ... One thing I take exception to is the 'blanket' statement that buying a standard stock index results in having to buy lower quality stocks as well as the good ones ...


If it's a focused, limited number of stocks index - maybe.

If it is a broad index, I don't see how it can avoid buying losers. After all, if the index total return is well below that the top stocks in the index are, something has to be dragging the index down in it's makeup.

In other threads, those who prefer the index to individual stocks have commented that the individual investor is likely not pruning their losers on a timely basis where a benefit to the index is the index methodology is pruning the losers (in some cases before bankruptcy) ... the losers have to be dropped on a regular basis, do they not?


Cheers


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## Eclectic12 (Oct 20, 2010)

AltaRed said:


> I don't doubt that backtested lists of stocks generally outperform the index but it is unkind to Couch Potato investors to denigrate the value of index investing by saying indices contain a lot of crap. They also contain a number of surprise stocks which would have never made it to a curated list in the first place. IOW, there are mitigative measures to losers that by definition are in indices. Few people are actually cut out to be stock pickers and to stay the course, and for them careful selection of backtested rules based ETFs can also perform admirably well ...


So those who know they aren't stock pickers shouldn't be concerned that there is junk in the index, IMO. I would expect they would value the time savings plus likely better returns than they would have done on their own more that a detail discussion such as this.


If there isn't junk in the index, please help me understand Yahoo's historical return numbers ... for Feb 22nd, 2001 through April 4th, 2017:

TSX composite as proxied by XIC ... +95%

_Stocks in the index ..._
TD bank ... +228%
Emera ... +191%
TransCanada ... +243%
Enbridge ... +464%

If the index is all good stocks - why is it lagging so badly?




AltaRed said:


> ... At the same time, I've advised and steered my ex to broad based ETFs because she has no interest in managing a stock portfolio. It simply is not fair to pick on indexers.


Whether one sees it as "picking on" an investment strategy or not - it is what it is.

Whether one is personally more suited to one flavour or another is a different question. After all, if the neighbour suggests doing one's own brake job is cheaper ... are they picking on the people who are all thumbs who take their car to a mechanic?


Cheers


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## humble_pie (Jun 7, 2009)

AltaRed said:


> I don't doubt that backtested lists of stocks generally outperform the index but *it is unkind to Couch Potato investors to denigrate the value of index investing by saying indices contain a lot of crap.* They also contain a number of surprise stocks which would have never made it to a curated list in the first place. IOW, there are mitigative measures to losers that by definition are in indices. Few people are actually cut out to be stock pickers and to stay the course, and for them careful selection of backtested rules based ETFs can also perform admirably well.
> 
> As an example, I am a stock picker in the Cdn markets and am pleased with the peformance of my stocks in aggregate against the market. At the same time, I've advised and steered my ex to broad based ETFs because she has no interest in managing a stock portfolio. _*It simply is not fair to pick on indexers.*_




my goodness! are we preparing new IIROC financial regulation M-103? no indexophobia allowed?

imho, it is accurate to say that stock indexes contain a fair proportion of losers. In what way is such a statement heresy? or even unkind?

saying in the abstract that indexes contain "surprise" stocks that did significantly better than any stock picker was ever able to spot, without offering even one specific example - ie which stock we talking about & even more importantly, which stock picker failed to notice or buy it? - is too meaningless an argument to be acceptable, imho.

is not calling a cmffer who has just posted a pleasant note complete with compliments to yourself "unkind" & "unfair" - is that not a bit too rich?

.


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## kcowan (Jul 1, 2010)

AltaRed said:


> The issue is there are a lot of surprise stocks in an index that were not foreseen in the first place either and they often negate the losers. Very little of that is known in advance.


I know of Nortel and BBY. Where were the surprise upsides? Yes the banks have done well but I have those covered. I have telecom covered and am light on mining.


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## AltaRed (Jun 8, 2009)

Eclectic12 said:


> If there isn't junk in the index, please help me understand Yahoo's historical return numbers ... for Feb 22nd, 2001 through April 4th, 2017:
> 
> TSX composite as proxied by XIC ... +95%
> 
> ...


I have never said there is no junk in the index. Indeed, I have specifically said there are losers there. At the same time, there are stocks in the index that surprise to the upside that few would have thought about, e.g. CCL, ATD.B, etc. .....which allows for some mitigation to the losers.

One can cherry pick half a dozen large cap stocks (in hindsight) that have done really well... such as TD, TRP, etc. Maybe even 20 or 30 blue chips. FWIW, those utility/pipeline/telecom stocks will underperform eventually when interest rates go up 200bp or so and debt servicing becomes more costly. The last 17 years could be considered data mining too since the last several years has seen the demise of the super commodity cycle. Might be better to look at a 50 year record. Remember when TRP nearly imploded? 

That said, I agree there is a lot of evidence that indexing is not the best methodology in Canada especially given our skewed index weighted to financials and energy. Stock picking should do better here by underweighting both financials and energy/materials. That is not necessarily the case in the USA though. Few can beat the S&P500 over long periods of time in any material way and I do index that (and International) markets.


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## kcowan (Jul 1, 2010)

Eclectic12 said:


> Whether one is personally more suited to one flavour or another is a different question. After all, if the neighbour suggests doing one's own brake job is cheaper ... are they picking on the people who are all thumbs who take their car to a mechanic?


I have done brakes jobs and I have done stock picking. I would choose stock-picking any day. One of the things that living in Mexico has taught me is that outsourcing hard jobs is great. Pay someone 16 pesos an hour to do stuff you would rather not do. Even if you sit on the lounge while they do it.

In Canada it is a tougher decision economically but it still holds! Focus your time where your returns are the greatest.


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## Eclectic12 (Oct 20, 2010)

I missed commenting on a few items ...



AltaRed said:


> ... They also contain a number of surprise stocks which would have never made it to a curated list in the first place.


YMMV ... I've been happy with some Venture exchange shares that made it on the more senior TSX then became part of the index. Others stick to picking from well established companies so making it into the index would put the company on their radar.




AltaRed said:


> ... IOW, there are mitigative measures to losers that by definition are in indices.


Can you expand on what these measures are?

I can think of being kicked out of the index manager by not meeting the index criteria and being delisted by the exchange (again for not meeting the criteria). 

Nortel was kicked out of the TSX/60 Dec 22, 2008 then declared bankrupcy Jan 14th, 2009 and finally delisted from the exchange in June 2009. There doesn't seem to have been a lot of time for much to be saved by the indexer. Clearly ahead of the holder to the end, though.


Cheers


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## Eclectic12 (Oct 20, 2010)

AltaRed said:


> I have never said there is no junk in the index. Indeed, I have specifically said there are losers there. At the same time, there are stocks in the index that surprise to the upside that few would have thought about, e.g. CCL, ATD.B, etc. .....which allows for some mitigation to the losers.


Between the large gains of the long timers as well as the "surprise" stocks ... that's a lot of mitigation for losers.


If I understand correctly, instead of saying there are no bad ones, you are concerned the number is being overblown, correct?




AltaRed said:


> ... One can cherry pick half a dozen large cap stocks (in hindsight) that have done really well... such as TD, TRP, etc.


I stuck to ones I own so there's no hindsight involved, except maybe I should have bought more or used leverage more for some of them.

Maybe even 20 or 30 blue chips. FWIW, those utility/pipeline/telecom stocks will underperform eventually when interest rates go up 200bp or so and debt servicing becomes more costly. The last 17 years could be considered data mining too since the last several years has seen the demise of the super commodity cycle. 




AltaRed said:


> ... Might be better to look at a 50 year record.


Note sure what difference that makes when my time window starts earlier. Unless you are thinking my parents should have bought stock on my behalf?




AltaRed said:


> ... Remember when TRP nearly imploded?


The good old days ... I liked what I saw from management so it was a 100% gain in about two years, plus increasing dividends. 
Had I known about split share leverage, I could of made an additional 400% but you live and learn.




AltaRed said:


> ... That said, I agree there is a lot of evidence that indexing is not the best methodology in Canada especially given our skewed index weighted to financials and energy.


The old Canadian Money Savers were cleaned out when my Mom downsized so I can't confirm how many decade updates of a ten stock portfolio did when tracked against the index. The two I recall was that the index lost nine out of ten years and the bad performing year, the index lost four of ten.





AltaRed said:


> ... Few can beat the S&P500 over long periods of time in any material way and I do index that (and International) markets.


For me, I index the US and have an active manager for the international markets. Based on other's complaints of their international performance where they say buying NA is enough exposure, the manager is well worth it.


Cheers


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## Eclectic12 (Oct 20, 2010)

kcowan said:


> I have done brakes jobs and I have done stock picking. I would choose stock-picking any day. One of the things that living in Mexico has taught me is that outsourcing hard jobs is great ... In Canada it is a tougher decision economically but it still holds!


My point is about whether one should be insulted where someone says they can do it cheaper and better than paying someone else. 

Were you insulted?
Why/why not?


After answering ... should an index investor be insulted by a DIY stock picking saying there is junk in the index?


Cheers


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## OnlyMyOpinion (Sep 1, 2013)

Well not to change the flavour of the thread (doughnut anyone?), but since someone asked about low div growth winners:
One I missed out on was DOL. Well I didn't miss it, I looked seriously at purchasing it a couple of times, but thought "surely it can't continue to grow as it has." Wrong.
Another I did well on from IPO to selling into the takoever news was THI. "How much more growth could they wring out under QSR with Burger King along." Quite a bit as it turns out.
On the other hand, my dividend blue chip loser was TA. It taught me to fold not hold, once the fundamentals hit the fan.

As AR notes, the point is that most investors are better off accepting the drag of the losers and the lift of the winners that provide *average market performance* for the majority of their portfolio (I leave room for a smaller stable of your 'winners' if so inclined), than they are relying on only a few stocks. Especially if your investing horizon is decades and especially if you are starting out. 
This bull is 8 years long and the intestinal fortitude of many who have a winning stable is untested. Those with a CCP approach may recognize both their stock-picking and their market timing limitations and be more likely to stay the course?


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## kcowan (Jul 1, 2010)

Here are Buffett's top picks:
View attachment 14561

Not much like the index. He says that the average investor should stay with the index.
He is not an average investor.


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## Eclectic12 (Oct 20, 2010)

The talk I saw, he said if one is willing to do the work - pick stocks. Otherwise, index.


I question how useful his picks are for the retail types as he is usually making deals that the retail small fry have no hope of matching. 


Cheers


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## mordko (Jan 23, 2016)

Those who bought Microsoft 25 years ago, Apple 10 year ago and Facebook 5 years ago but avoided Blackberry, Nortel, Enron and Valeant should stay away from the index. No question there. 

Those who picked CN, banks, utilities and pipelines... Awesome job but do be aware that you are 100% in the hands of a chance. The performance of these stocks is 90% defined by the government which either transfers taxpayers' money to the shareholders (e.g. CN), takes risk off shareholder's hands and creates a moat to protect them (banks) or determines the level of profit through various regulatory means (pipelines, utilities). Will the government always favour the exact same set of companies? Perhaps. Or perhaps another set of companies discover a family friend in their midst and an even nicer vacation could change things around.


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## Eclectic12 (Oct 20, 2010)

OnlyMyOpinion said:


> ... As AR notes, the point is that most investors are better off accepting the drag of the losers and the lift of the winners that provide *average market performance* for the majority of their portfolio (I leave room for a smaller stable of your 'winners' if so inclined), than they are relying on only a few stocks.


It didn't read that way to me with "taking exception" as well as talk of how indexers were being insulted by pointing out that some index stocks under perform.




OnlyMyOpinion said:


> ... This bull is 8 years long and the intestinal fortitude of many who have a winning stable is untested. Those with a CCP approach may recognize both their stock-picking and their market timing limitations and be more likely to stay the course?


This didn't seem to make a difference to several of my co-workers, CCP or with advisors around Dec 2008. I'm suspecting it's more personality driven than investment philosophy but don't have any numbers get beyond the anecdotes.


OTOH, I didn't want to risk losing the approximately 4x gain for about some stocks so sold a good chunk towards the high. Everything else I left as is. Worked out nicely to re buy in a couple of months for half price, with no dividend cuts. Of what was held, there were two that reduced dividends.

I also put fresh money into a range of stocks as well as took a calculated risk with a leveraged investment that worked well.


The main regret was I didn't put more fresh money into the US index near it's lows.


Cheers


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## Eclectic12 (Oct 20, 2010)

mordko said:


> Those who bought Microsoft 25 years ago, Apple 10 year ago and Facebook 5 years ago but *avoided Blackberry, Nortel*, Enron and Valeant should stay away from the index ...


Not sure why I would have wanted to avoid these ones ... for BB, three made trades roughly the same money while the last wiped out the last gain. For Nortel, 2/3 was sold for a 300% profit and the remaining third was sold for 180% profit.




mordko said:


> ... Those who picked CN, banks, utilities and pipelines... Awesome job but do be aware that you are 100% in the hands of a chance ... Will the government always favour the exact same set of companies?


So you don't see the +129%, +247%, +448% and +733% as buffers buying one time to react to market/gov't changes?


Cheers


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## mordko (Jan 23, 2016)

Backtesting is great. Amazing though how it always works, 100% of the time. Backwards. Full marks to those who buy and sell at the right time every time. How come - on average - investors underperform? Can't they all do the same backtest and overperform the damn index? 

Buffers are awesome if we want to reminisce and pat ourselves on the shoulder. We are here and now. It's time zero and we all have a starting amount of $X. The real question is what happens next.


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## agent99 (Sep 11, 2013)

Shouldn't y'all be doing your taxes or something??

BTW, Thread Title is: Choosing Dividends over Capital Gains (not indexing vs stock picking)


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## james4beach (Nov 15, 2012)

Everything comes back to the indexing argument 

I've actually warmed up to the stock picking idea, but only if I get a manager with proven track record to do it. Holding a basket of individual stocks requires monitoring and management... you can't just buy & hold & forget. Even the index maintainers don't. The TSX Composite is constantly dropping and adding brand new stocks.


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## AltaRed (Jun 8, 2009)

Eclectic12 said:


> It didn't read that way to me with "taking exception" as well as talk of how indexers were being insulted by pointing out that some index stocks under perform.


OMO got my meaning right. But as someone also just pointed out, this thread has gotten derailed from the original intent of debating cap gains vs dividends.


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## mordko (Jan 23, 2016)

The two issues are related because picking dividend stocks = active, aka "stock picking". 

Like I am of the opinion that stocks paying higher than average dividend are overvalued right now but I accept that I may be wrong. So I index and don't have to care.


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## Oldroe (Sep 18, 2009)

You would be wise to hire somebody.

I've picking stocks for 25 years, think I will continue.


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## Eder (Feb 16, 2011)

OnlyMyOpinion said:


> This bull is 8 years long and the intestinal fortitude of many who have a winning stable is untested.


Hold it here...our bull is only 15 months old by my math we were down 23% Jan.2016....so I guess on average we should go up another 4 years?


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## Eder (Feb 16, 2011)

mordko said:


> Like I am of the opinion that stocks paying higher than average dividend are overvalued right now but I accept that I may be wrong. So I index and don't have to care.


I buy & hold so I don't have to care.


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## doctrine (Sep 30, 2011)

james4beach said:


> I've actually warmed up to the stock picking idea, but only if I get a manager with proven track record to do it. Holding a basket of individual stocks requires monitoring and management... you can't just buy & hold & forget. Even the index maintainers don't. The TSX Composite is constantly dropping and adding brand new stocks.


Buy and hold is not dead. In fact, it is one of the best long term strategies. As Jeremy Siegel demonstrated in "Stocks for the Long Run", S&P themselves cannot pick stocks in a way that beats a buy and hold strategy of their own original index. A buy-and-hold of the original S&P 500 has outperformed the S&P 500 and its addition and subtraction of stocks. Of course, it wasn't easy to buy an equal weight portfolio of the S&P 500 in 1957, but the result is nonetheless very interesting.


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## agent99 (Sep 11, 2013)

Eder said:


> Hold it here...our bull is only 15 months old by my math we were down 23% Jan.2016....so I guess on average we should go up another 4 years?


This is true. TSX is only up about 700 points since it's peak in 2008. Looking at chart, a 1000-2000 point correction wouldn't be surprising. But just when is another thing.
https://www.google.ca/search?q=tsx+...69i59j69i61.4409j0j8&sourceid=chrome&ie=UTF-8 Click on Max.


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## AltaRed (Jun 8, 2009)

Corrections don't count when calculating a bull market. It's the time since the end of the last bear which I think was March 2009. Did we have a drop exceeding 20% in the interim period?


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## Eder (Feb 16, 2011)

We had a 23% drop from about July 2015 to Jan 2016...bear market = 20% or more correction so "YAY" we got that out of the way. 
I'm surprised many are unaware of this and are still making dire warnings about over due corrections for the TSX. Lets party!!!


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## AltaRed (Jun 8, 2009)

Interesting. Obviously primarily a commodity "bear" that I didn't see or feel.


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## james4beach (Nov 15, 2012)

doctrine said:


> Buy and hold is not dead. In fact, it is one of the best long term strategies. As Jeremy Siegel demonstrated in "Stocks for the Long Run", S&P themselves cannot pick stocks in a way that beats a buy and hold strategy of their own original index. A buy-and-hold of the original S&P 500 has outperformed the S&P 500 and its addition and subtraction of stocks. Of course, it wasn't easy to buy an equal weight portfolio of the S&P 500 in 1957, but the result is nonetheless very interesting.


I had no idea that holding the original S&P 500 formulation -- without additions/deletions -- would have done so well. What if you bought & held the TSX index as it was in the late 90s, with heavy weights in Nortel and Bombardier? I can't imagine that was a winning combination.

Let's try it out, 16 year buy and hold. Here was the TSX 60 at the end of 2000:

24% NT
5.7% BCE
5.0% RY
4.4% TD
3.8% BBD.B
3.6% MFC
3.5% BNS
3.3% BMO
2.9% CM
2.7% SLF
2.7% Alcan ... I don't know how to account for this
2.2% CP
2.1% CLS
1.7% Alberta Energy ... became ECA

These were the heaviest weights in the index. Let's be generous and cap NT at 6.0%, eliminate Alcan, and then scale the proportions to form 100% total weight. The resulting buy & hold portfolio is:

12.8%	NT
12.2%	BCE
10.7%	RY
9.4%	TD
8.1%	BBD.B
7.7%	MFC
7.5%	BNS
7.0%	BMO
6.2%	CM
5.8%	SLF
4.7%	CP
4.5%	CLS
3.6%	ECA

According to my data with total returns (and someone else might want to check this), the total returns since 2001-01-01 are

NT	-100%
BCE	169.34%
RY	502.71%
TD	397.39%
BBD.B	-89.34%
MFC	44.63%
BNS	521.58%
BMO	391.37%
CM	366.11%
SLF	107.10%
CP	1122.59%
CLS	-76.05%
ECA	86.95%

This is looking interesting. There are some very high returns in here, more than enough to compensate for the big losers. The weighted average total return since 2001-01-01 is 240%.

XIU's total return is only 130%. So it seems buy & hold did quite well vs XIU


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## agent99 (Sep 11, 2013)

james4beach said:


> This is looking interesting. There are some very high returns in here, more than enough to compensate for the big losers. The weighted average total return since 2001-01-01 is 240%.
> 
> XIU's total return is only 130%. So it seems buy & hold did quite well vs XIU


More than 50% of the stocks in TSX60/XIU pay good dividends. It would be interesting to compare how buying and holding the top 50% dividend payers in TSX60 would compare with buying and holding the index as a whole over that same period. I suspect they would have done even better.


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## james4beach (Nov 15, 2012)

Yes the dividend payers likely did better, but it's hard to separate this from a sector issue. Canadian financials also did very well in this period, and they happen to pay strong dividends.

US and European financial stocks also paid dividends, but in those markets the financial sector was one of the worst performers. You wouldn't walk away from that saying "wow, dividend payers did great!"

Even in my buy & hold example, financials are over 50% of the portfolio. Is it more accurate to attribute the outperformance vs XIU to being overweight financials?


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## gibor365 (Apr 1, 2011)

> Yes the dividend payers likely did better


 james, in one of the posts you mentioned CDZ, when I had TDW account, I created dummy portfolio "mini-CDZ" , it included stocks from CDZ that had: yield > 2%, P/E < 20, payout ratio < 90% . This "mini-CDZ" portfolio outperfomed CDZ in any given time


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## Bill G (Jan 8, 2017)

AltaRed said:


> Corrections don't count when calculating a bull market. It's the time since the end of the last bear which I think was March 2009. Did we have a drop exceeding 20% in the interim period?


I have come across some philosophical discussions about bear markets and bull markets .... for me, March 2009 was the bear market low, not the end of the last bear market. My preferred definition of a bear market ending would be when the previous market peaks are breached ... So, under this approach, the bear market would have "ended" around April 2014 when the 2008 highs were taken out. (A case could be made for the bear market ending in March 2011, when markets got quite close to the 2008 peak). 

Recall that in August-September 2011 the TSX was still about 21% below 2008 highs and certainly did not have a "glad this bear market is over" feel to it.


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## agent99 (Sep 11, 2013)

james4beach said:


> Yes the dividend payers likely did better, but it's hard to separate this from a sector issue. Canadian financials also did very well in this period, and they happen to pay strong dividends.
> 
> US and European financial stocks also paid dividends, but in those markets the financial sector was one of the worst performers. You wouldn't walk away from that saying "wow, dividend payers did great!"
> 
> Even in my buy & hold example, financials are over 50% of the portfolio. Is it more accurate to attribute the outperformance vs XIU to being overweight financials?


James, it is true that TSX60/XIU has performed well because of allocation. And would likely have performed even better if the non-dividend stocks were pruned. But perhaps the better performance of dividend payers over time should rather be blamed on the poor long term performance of cyclical stocks, many of which pay little or no dividend. In Canada, resource stocks and tech stocks in particular. We are fortunate to have well run banks and stricter regulation than most countries. But not to say that this will last forever. There was a time that many of thought that the world was running out of oil and that investing in energy was a no-brainer.

But back to the subject of this thread!

This is an interesting study showing how dividend payers have outperformed non-dividend payers over an extended period in USA (you may have to register to see full article)

https://seekingalpha.com/article/3997749-dividend-stocks-outperform


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## Eclectic12 (Oct 20, 2010)

mordko said:


> Backtesting is great. Amazing though how it always works, 100% of the time.


True ... though as I say in post #96, I stuck to what was in the index and what I bought so there's live $$$ involved. (It also means that if I see something weird in Yahoo's historical numbers, I can use my brokerage info to verify.)




mordko said:


> ... Full marks to those who buy and sell at the right time every time. How come - on average - investors underperform? Can't they all do the same backtest and overperform the damn index?


LOL ... most are selling as they can't afford more paper losses, find it complicated so they are handing over to a MF or feel it is too risky so they are sticking to GICs/deposits. For the pros, when cash flows in - they have to do something with it in a more restricted way than the individual.




mordko said:


> ... We are here and now. It's time zero and we all have a starting amount of $X. The real question is what happens next.


Absolutely ... but at the same time, if there's a +400% buffer to react to changes, no change in the regulation for main business and management is buying US assets with twenty year contracts with minimal maintenance costs *on top of a good past history*, is that a ton to worry about?


Cheers


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## Eclectic12 (Oct 20, 2010)

agent99 said:


> Shouldn't y'all be doing your taxes or something??


The last T3 should be available next week ... 




AltaRed said:


> agent99 said:
> 
> 
> > ... BTW, Thread Title is: Choosing Dividends over Capital Gains (not indexing vs stock picking)
> ...


Giving preference to one or the other means stock picking does it not?

The way to give CG a preference would be the CG only investments ... otherwise, one is picking from a limited field - with large sectors having to be ignored.


Cheers


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## hboy54 (Sep 16, 2016)

Hi:

After 13 pages, here is my definitive answer to the headline question "choosing dividends over capital gains" ... drum roll:

"Yes please."

hboy54


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## agent99 (Sep 11, 2013)

hboy54 said:


> Hi:
> 
> After 13 pages, here is my definitive answer to the headline question "choosing dividends over capital gains" ... drum roll:
> 
> ...


Using this new-found toy, proves you right! Dividend and Income index beat TSX60 since yr 2000. 

http://www.theglobeandmail.com/glob...id=53057&symbol=&style=na_eq&profile_type=ROB

Haven't checked the details of that index though.


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## Eclectic12 (Oct 20, 2010)

agent99 said:


> More than 50% of the stocks in TSX60/XIU pay good dividends ...


I've said in the past that other threads indicated that for NA indexes, 80% plus of the index pays dividends. This is why I see the "dividends / no dividends" as a side issue compared to evaluating the company and the price being paid to buy.

FWIW (the TSX composite is taking longer to check) - the "more than 50%" is an understatement. Using Wiki's list at https://en.wikipedia.org/wiki/S&P/TSX_60, *90% pays dividends*.


If dividends really don't matter ... shouldn't the other factors be more important?





agent99 said:


> James, it is true that TSX60/XIU has performed well because of allocation. And would likely have performed even better if the non-dividend stocks were pruned. But perhaps the better performance of dividend payers over time should rather be blamed on the poor long term performance of cyclical stocks, many of which pay little or no dividend. In Canada, resource stocks and tech stocks in particular ...


It would be interesting to find the composition of the S&PTSX60 circa 2000. It seems that as it stands today, non-dividend paying stocks are six (accounting for 10% of the 60). Of those six ... three are mining companies, one is manufacturing, one is clothing and one is restaurants.


Cheers


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## peterk (May 16, 2010)

Eclectic12 said:


> This is why I see the "dividends / no dividends" as a side issue compared to evaluating the company and the price being paid to buy.


Yes, I like to look at whether it is good purchase or not. Then as a side thought I notice what the dividend pays and what account I need to keep it in to best minimize taxes. I have a big spreadsheet that sorts by "tax yield of dividends" to determine how my total portfolio of CAD and US equities need to be allocated into Unregistered/RRSP/TFSA. High dividends are generally a hindrance, especially USD dividends.


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## dogleg1 (Jul 4, 2016)

peterk: Could you give me a quick run down on how CRA treats US versus Can. dividends please. I checked it a while back but forget.


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## agent99 (Sep 11, 2013)

Eclectic12 said:


> - the "more than 50%" is an understatement. Using Wiki's list at https://en.wikipedia.org/wiki/S&P/TSX_60, *90% pays dividends*.
> 
> It would be interesting to find the composition of the S&PTSX60 circa 2000. It seems that as it stands today, non-dividend paying stocks are six (accounting for 10% of the 60). Of those six ... three are mining companies, one is manufacturing, one is clothing and one is restaurants.
> 
> Cheers


I wrote "More than 50% of the stocks in TSX60/XIU pay *good* dividends ..."

You can confirm this here: https://www.topyields.nl/tsx60-best-dividend-stocks/ (I posted this before and used it to come up with my 50%  )


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## peterk (May 16, 2010)

dogleg1 said:


> peterk: Could you give me a quick run down on how CRA treats US versus Can. dividends please. I checked it a while back but forget.


Quickly: 

-CAD divs you pay 0% in TFSA and RRSP, dividend marginal rate in unregistered.
-US divs you pay 15% in TFSA, 0% in RRSP, income marginal rate in unregistered.

-Foreign (non USA) companies, held directly or through ADRs, are trickier...

There's also the matter of the RRSP withdrawal, and whether to have your dividends tax deferred, or reduced by keeping in non-registered... Which is why generally you want to keep your bonds and "low return" allocations in RRSP preferentially.


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## Eclectic12 (Oct 20, 2010)

dogleg1 said:


> peterk: Could you give me a quick run down on how CRA treats US versus Can. dividends please. I checked it a while back but forget.


*Edit*
<deleted wrong info>

US dividends are taxed the same as employment/interest income.


Cheers


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## Eclectic12 (Oct 20, 2010)

agent99 said:


> I wrote "More than 50% of the stocks in TSX60/XIU pay *good* dividends ..."


Missed the "good dividends" part ... my bad. :biggrin:


Interesting that effort is going into pointing that dividends don't matter, don't change volatility etc. where it seems little attention is being paid to making sure the investment is reasonable or that with so many paying dividends, it would be hard to avoid them.


Cheers


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## dogleg1 (Jul 4, 2016)

Peterk& Eclectic12: Thank you for the help, I appreciate it. This entire forum is enormously valuable, thanks to all posters .


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## peterk (May 16, 2010)

Eclectic12 said:


> It seems to depend where one is on the income scale.
> 
> Looking at the Ontario 2016 tax rates ... http://www.taxtips.ca/taxrates/on.htm:
> 
> ...


Er, is this right? I think you are getting non-eligible _Canadian_ dividends from small businesses mixed up with US dividends. US dividends are taxed at marginal interest income rate, no?


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## Spudd (Oct 11, 2011)

peterk said:


> Er, is this right? I think you are getting non-eligible _Canadian_ dividends from small businesses mixed up with US dividends. US dividends are taxed at marginal interest income rate, no?


You are right, Peter, Eclectic is mistaken on this one.


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## Eclectic12 (Oct 20, 2010)

Spudd said:


> peterk said:
> 
> 
> > Er, is this right? I think you are getting non-eligible _Canadian_ dividends from small businesses mixed up with US dividends. US dividends are taxed at marginal interest income rate, no?
> ...


My bad ... :eek2:


Cheers


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## mordko (Jan 23, 2016)

Eclectic12 said:


> Interesting that effort is going into pointing that dividends don't matter, don't change volatility etc. where it seems little attention is being paid to making sure the investment is reasonable or that with so many paying dividends, it would be hard to avoid them.


- Once upon a time when people pursued pure growth. It was a fad. That's history. Today only really weird people "avoid dividends". 
- Dividends do matter. It's a good thing. Anything on the plus side is a good thing. 

The specific concern isn't "dividends" per se. At issue is the trend to use stocks with dividends much higher than average as surrogate bonds. The logic works like this: 
1. Dividends always go up. Hence they will go up. 
2. Stock price does not matter, see 1. And if it does, it will go up; look at the recent trends for high dividend stocks. 
3. Bonds pay interest which barely beats inflation - if at all. 
4. High dividend stocks = new bonds, except better. 

That's a fallacy because 1 is wrong. And 2 is wrong. And hence 4 is wrong. And because this fad is so widely spread in Canada right now, the probability of this strategy having a good return is very low.


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## Eder (Feb 16, 2011)

If bonds do not outpace inflation there is no reason for an individual investor to own one.


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## mordko (Jan 23, 2016)

Totally. Which is a good reason to get on a time machine and find out which assets will outpace inflation.


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## SWIG (Apr 7, 2017)

This would certainly help evaluate the statement.


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## agent99 (Sep 11, 2013)

Eder said:


> If bonds do not outpace inflation there is no reason for an individual investor to own one.


I think what you are saying makes sense. In making an investment decision as an individual, why invest in a bond that has a yield that is less than the current inflation rate and almost no hope of capital appreciation? Interest rates are almost as low as they can get (and therefore bond prices as high as they are likely to be). 

Its hard to find even corporate bonds with reasonable ratings that have yields that exceed CPI by much. Have to go out beyond 5 years and who know where interest rates will then be. 

Investing in low yield bonds, GICs and HIS accounts is just treading water, but it does provide insurance against a crash in the markets. We used to have about 60% in FI, but now about 40% (plus CPP/OAS) even although well into retirement.


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## My Own Advisor (Sep 24, 2012)

There are arguments to be made for owning _more_ equities as you get older as well....i.e., in a low yield environment bonds aren't earning much more than idle cash so you might as well have a sizable cash wedge and lots of equities for capital gains to sell.


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## Eclectic12 (Oct 20, 2010)

mordko said:


> - Once upon a time when people pursued pure growth. It was a fad ...


Any idea of when that was?

AFAICT - dividends have been a major part of the market for at least fifty years.

That's history. Today only really weird people "avoid dividends". 
- Dividends do matter. It's a good thing. Anything on the plus side is a good thing. 




mordko said:


> ... The specific concern isn't "dividends" per se. At issue is the trend to use stocks with dividends much higher than average as surrogate bonds ...


If so, it's barely being written about and IMO being drowned out by the "be wary of dividends".




mordko said:


> ... And because this fad is so widely spread in Canada right now, the probability of this strategy having a good return is very low.


With *90%* of the S&P/TSX60 paying dividends - shouldn't the effort be about buying a good investment?

S&P500 according to another thread is over 80%.


It is odd to me that so much effort is going into showing that dividends don't matter, the index is better yet the index has an high percentage of dividends.


Cheers


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## Eclectic12 (Oct 20, 2010)

My Own Advisor said:


> There are arguments to be made for owning _more_ equities as you get older as well....i.e., in a low yield environment bonds aren't earning much more than idle cash so you might as well have a sizable cash wedge and lots of equities for capital gains to sell.


I can see where if a one year GIC is paying less than a saving deposit, one might have more savings deposits than one used to have GICs. Or one might go with Gold.

I am not sure I'd be moving money from a GIC into more equities on a large basis.


Cheers


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## Eder (Feb 16, 2011)

Cash wedge as I believe Tom pointed out is +EV enabling the investor to take advantage of temporary screaming buys....much more value than bombing the money into a tepid GIC


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## james4beach (Nov 15, 2012)

One thing that's great about dividends is that they are automatic payments. I opened a new TD Waterhouse account today and one of the questions they asked was, do you want dividends paid to this account or paid directly to your bank's chequing account?

That's a nice feature. You just see the cash automatically appearing in your chequing account... that's very convenient. Combined with the tax benefits of eligible dividends and the easy T5 reporting, that whole combination makes a strong practical argument for dividend investing.

Which can be as simple as buying XIU


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## like_to_retire (Oct 9, 2016)

james4beach said:


> ...........Combined with the tax benefits of eligible dividends and the easy T5 reporting, that whole combination makes a strong practical argument for dividend investing.
> 
> Which can be as simple as buying XIU



Well, not exactly as simple as XIU. 

With XIU you have to consider onerous tax implications of Eligible Dividends, Non-Eligible Dividends, Capital gains, Return of Capital, Other income, Foreign Income, Special Distributions and Reinvested capital gain distribution.

You have to keep track that quarterly cash distributions of return of capital are not taxable immediately from the cash received as they're not re-invested in new shares and so subtracted from ACB to eventually be taxable at time of sale. While yearly distribution of (poorly reported) reinvested capital gain is taxable as capital gains with no cash received and no new units, but consolidated, and so added to ACB.

Lots of jiggery-pokey going on with an ETF - individual common shares paying a dividend are much simpler.

ltr


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## Pluto (Sep 12, 2013)

mordko said:


> - Once upon a time when people pursued pure growth. It was a fad. That's history. Today only really weird people "avoid dividends".
> - Dividends do matter. It's a good thing. Anything on the plus side is a good thing.
> 
> The specific concern isn't "dividends" per se. At issue is the trend to use stocks with dividends much higher than average as surrogate bonds. The logic works like this:
> ...


That wasn't really the reasoning for persuing "pure growth". The reason was dividends were/are taxed more heavily than capital gains. Plus fast grwoing comanies wanted the $ to grow the company. It made sense, and still does, providing their reinvestment of profit actually contributed to growth. It is not a bygone fad, but a legitimate strategy based on the premise that they can actually be successful in growing.


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## AltaRed (Jun 8, 2009)

Pluto said:


> That wasn't really the reasoning for persuing "pure growth". The reason was dividends were/are taxed more heavily than capital gains. Plus fast grwoing comanies wanted the $ to grow the company. It made sense, and still does, providing their reinvestment of profit actually contributed to growth. It is not a bygone fad, but a legitimate strategy based on the premise that they can actually be successful in growing.


I agree pure growth is still a legitimate strategy today. However, pure growth has gotten lost in the rush to dividends by income starved empty nesters/retirees and companies have taken advantage of this 'demand'. IOW, companies have found that pushing dividends (and yield) has increased their valuation multiples, which in turn has given them increased market capitalization, which in turn allows them to go back to the markets for yet more 'cheap' equity. Think about the llikes of Crescent Point which at one time created a cult following with their dividend policy and could issue cheap equity any time they wanted at elevated levels. Few want to touch that stock today at any price (well, maybe under $10 perhaps). 

Another current example many investors don't think about is BCE. Highly leveraged in debt and a very high dividend payout ratio. ENB is yet another one. Both (and others like them) will suffer in a material increase in the bond yield curve. But before anyone gets too irritated by what I just said, I own those two stocks anyway, knowing that some day I might only have the dividend to count on (despite a potential cyclic (or secular) decline in stock price).


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## mordko (Jan 23, 2016)

"High Dividends" is a factor, somewhat related to value. However today we have much better indicators of value as dividends can be manipulated at will! e g by borrowing or cutting investment. Growth is also a factor, negatively correlated to value. Over very long periods of time factors such as value have given higher returns, although a lot depends on which particular decade(s) we are looking at.

As with all factors, crowds tend to rush for the "fad of the day", which has performed well comparatively recently. While they are pursuing such factors, the prices get inflated and returns diminish. Then the crowds get disappointed and rush for another factor, thus ensuring constant underperformance.

This is described in the Intelligent Investor by Benjamin Graham. Naturally, companies respond to "fad of the day". Graham describes how strong companies reduced or altogether stopped paying dividends and stock prices rose to unreasonable levels in response. 1990s provided another example of growth being the fad of the day, to the detriment of many. Then the argument was that dividends were bad because companies can generate better returns by not paying dividends.

To me it's obvious that Canadian investors are falling for the dividend fad right now, leading to stock price inflation in target companies.


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## humble_pie (Jun 7, 2009)

... duplicate post


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## humble_pie (Jun 7, 2009)

AltaRed said:


> I agree pure growth is still a legitimate strategy today. However, pure growth has gotten lost in the rush to dividends by income starved empty nesters/retirees and companies have taken advantage of this 'demand'. IOW, companies have found that pushing dividends (and yield) has increased their valuation multiples, which in turn has given them increased market capitalization, which in turn allows them to go back to the markets for yet more 'cheap' equity. Think about the llikes of Crescent Point which at one time created a cult following with their dividend policy and could issue cheap equity any time they wanted at elevated levels. Few want to touch that stock today at any price (well, maybe under $10 perhaps).
> 
> Another current example many investors don't think about is BCE. Highly leveraged in debt and a very high dividend payout ratio. ENB is yet another one. Both (and others like them) will suffer in a material increase in the bond yield curve. But before anyone gets too irritated by what I just said, I own those two stocks anyway, knowing that some day I might only have the dividend to count on (despite a potential cyclic (or secular) decline in stock price).




excellent post, i totally agree. I'm quoting it above in the hopes that frequent repetition may help it to sink in.

btw a concern about BCE raised by some forensic analysts is the large pension obligation. This - say the analysts - is not carried on the books as debt, doesn't show up in the balance sheet even though it does increase the size of BCE obligations. 

it's my understanding that BCE is aware of this concern from some quarters. Most "management discussion" quarterly reports will include a sentence mentioning that all pension obligations have been met for the quarter, probably to assuage such analysts.

the concern with high debt levels is legitimate. "Dividend" distributions can be entirely or almost entirely financed by a company taking on more debt. I don't believe that crescent point was the only one doing this, rather the practice tends to accompany the unit trust sector. Shall we say it's a legacy of the pre-flaherty ex-unit trust sector.

there are also numerous exchange-traded hybrids these days where dividends are financed by option trading, at least partially. What kind of option strategy such a company is following is often difficult to discern, one needs to be a fairly knowledgeable option trader in order to be able to peer through their prospectuses & detect the strategy they are using.

as with ETFs that are still allowed to hide their use of derivatives, swaps, options, futures & representational sampling strategies, it's often easier to discern what a company is actually up to by reading their prospectuses, than by reading their financial statements. At the present time, it appears that regulators do not require these companies to set forth the loan, swap, sample or derivative instruments in audited financial statements.

.


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## mordko (Jan 23, 2016)

^ As always, complete BS and conspiratology about ETFs. Those that use derivatives, loans and swaps make information available.


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## Eclectic12 (Oct 20, 2010)

AltaRed said:


> Pluto said:
> 
> 
> > That wasn't really the reasoning for persuing "pure growth". The reason was dividends were/are taxed more heavily than capital gains.
> ...


How are the "pure growth" people skipping dividends?

I know of a few non-dividend paying stocks but for some sectors - to do so means skipping the sectors.


Cheers


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## humble_pie (Jun 7, 2009)

mordko said:


> ^ As always, complete BS and conspiratology about ETFs. Those that use derivatives, loans and swaps make information available.



they do make the derivative, loan & sampling information available in their prospectuses.

so far, regulators do not require these funds to set forth their individual option, swap & future positions, nor their individual loaned-out security positions, nor their individual representational sampling & synthetic positions, in their annual & semi-annual financial statements.

the omission is glaring. Presumably after enough consumers complain, regulators will force more disclosure. It is consumer pressure which has forced the present CMR financial disclosures that we are seeing in our new-format broker statements.

recently i've glimpsed at least one US ETF vendor declaring openly - in its front page marketing literature as well as in its prospectus - that it does not hold the exact securities whose return it is promising to deliver to unit holders. 

rather, this company declares, its funds hold suites of stocks whose return is *expected* to deliver the return of a particular index.

it's refreshing but unusual to see this set forth boldly in the up-front marketing pages. Usually the language about futures-options-swaps-representational-sampling-synthetics-loaned-out-securities-derivatives is buried deep in an ETF prospectus, which investor/consumers seldom read.

i am left wondering why the above point seems so difficult for some to grasp. We do not expect our banks to hold piles of shiny physical loonies & toonies in a basement vault after we deposit money into our bank accounts. We are comfortable with the fact that the bank holds regulated tiered capital plus trillions of finely-sliced loan, swap & counterparty agreements, all managed 24 hours a day across global markets by its treasury floor.

why then would we be upset with the fact that the banks are doing the same thing with their ETFs? including ETFs they sell under their own banner as well as the ETFs they sponsor through giant affiliated institutons such as black rock, whose ETF shares the banks are able to borrow extensively for shorting by hedge funds. Note that such activity is conducted at brokers which the banks already own, thus completing the loop.

if we are happy with the fact that the bank promises it will give us back our dollars on a daily basis, or at the end of a fixed term, why should we not be happy with the fact that the bank promises it will give us the return of an indexed group of stocks?

in neither case does the bank hold all of the physical assets they are pledging to return to us. They do not hold all of our physical dollars. They declare, in their ETF prospectuses, that neither do they hold all of the physical shares that consitute an index.

.


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## AltaRed (Jun 8, 2009)

Eclectic12 said:


> How are the "pure growth" people skipping dividends?
> 
> I know of a few non-dividend paying stocks but for some sectors - to do so means skipping the sectors.


They don't necessarily avoid dividends, but they don't care about things like yield either. There are lots of companies in the Composite Index that don't pay dividends, or are at a very low yield (<1%). Investors focused on growth focus on double digit ROE, e.g. 15% or better. FWIW, all my stocks are dividend paying stocks but yield is not the key criteria.


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## Eclectic12 (Oct 20, 2010)

AltaRed said:


> They don't necessarily avoid dividends, but they don't care about things like yield either.


Sounds like they are looking for good investments and letting the dividends or lack thereof, fall where they may. 




AltaRed said:


> ... There are lots of companies in the Composite Index that don't pay dividends, or are at a very low yield (<1%) ...


I am in progress of checking as the last statement was the Composite index was 80% better paid dividends.

There are lots of low yield one for sure.


Cheers


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## james4beach (Nov 15, 2012)

mordko said:


> To me it's obvious that Canadian investors are falling for the dividend fad right now, leading to stock price inflation in target companies.


I agree with mordko, but I'd also say that since the TSX 60 contains many high dividend payers, Canadian "dividend investing" isn't _that_ different than just owning XIU.


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## like_to_retire (Oct 9, 2016)

james4beach said:


> I agree with mordko, but I'd also say that since the TSX 60 contains many high dividend payers, Canadian "dividend investing" isn't _that_ different than just owning XIU.


It's totally different. 

XIU is 40% financials and 22% energy, so 62% is concentrated in 2 sectors. Where financials and energy goes, so goes XIU. 

Proper dividend investing allows you to equalize the sector concentration. It's an entirely different ballgame and one that beats the index quite easily over time.

If I look at my own portfolio of Canadian dividend stocks, I equalize 8 of the 11 sectors in Canada. This results in 12.5% in each of the 8 sectors. I avoid the 3 volatile sectors of Materials, Information Tech and Health Care, and then equalize Financial Bank, Financial Non-Bank, Energy, Telecom, Utilities, Consumer Discretionary, Consumer Staples and Industrial.

My total compound cumulative return since Nov 2011 as of today is 88.09%, while the XIU Index return is 53.18%.

ltr


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## mordko (Jan 23, 2016)

Canada is too small and, yes, concentrated in a few sectors. XIU shouldn't make more than 30% of ones stock portfolio, which is why the above comparison does not make sense.

Over a 5-year period XWD is up 92%, not counting the dividends. That's a better return with a lower risk vs picking a few stocks from a selection of sectors in Canada.


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## agent99 (Sep 11, 2013)

james4beach said:


> I agree with mordko, but I'd also say that since the TSX 60 contains many high dividend payers, Canadian "dividend investing" isn't _that_ different than just owning XIU.


As posted before, XIU is only about 50% stocks with a barely decent dividend. Last time I looked just 27 paid 2% or more. Personally, I own a lot of the names in the top 50% XIU dividend payers and almost none in the bottom 50% (Have some Loblaws and some Barrick, neither of which have been worth owning)


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## Dilbert (Nov 20, 2016)

agent99 said:


> As posted before, XIU is only about 50% stocks with a barely decent dividend. Last time I looked just 27 paid 2% or more. Personally, I own a lot of the names in the top 50% XIU dividend payers and almost none in the bottom 50% (Have some Loblaws and some Barrick, neither of which have been worth owning)


+1IMHO


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## Eclectic12 (Oct 20, 2010)

james4beach said:


> I agree with mordko, but I'd also say that since the TSX 60 contains many high dividend payers, Canadian "dividend investing" isn't _that_ different than just owning XIU.


By my count, the S&P/TSX 60 has 54 dividend payers and six non-dividend payers. Anyone picking this index is into dividends to a large degree.

Any bets on how many in XIU pay dividends?


Cheers


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## mordko (Jan 23, 2016)

Eclectic12 said:


> By my count, the S&P/TSX 60 has 54 dividend payers and six non-dividend payers. Anyone picking this index is into dividends to a large degree.
> 
> Any bets on how many in XIU pay dividends?
> 
> ...


I am a bit lost. XIU = TSX 60.


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## Eclectic12 (Oct 20, 2010)

mordko said:


> I am a bit lost. XIU = TSX 60.


My bad ... XIC, which is the bigger composite.


Cheers


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## mordko (Jan 23, 2016)

I don't know but their yield is almost identical. The main difference is that XIC has noticeably lower weighting in the largest firms such as banks. Unless one goes belly up, the performance will be very close.


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## james4beach (Nov 15, 2012)

Eclectic12 said:


> By my count, the S&P/TSX 60 has 54 dividend payers and six non-dividend payers. Anyone picking this index is into dividends to a large degree.


Right. Virtually everything in XIU (the TSX 60) pays a dividend. If you're invested in XIU, you're doing dividend-heavy investing ... if that means anything.

I think XIC contains fewer dividend payers.


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## agent99 (Sep 11, 2013)

james4beach said:


> Right. Virtually everything in XIU (the TSX 60) pays a dividend. If you're invested in XIU, you're doing dividend-heavy investing ... if that means anything.
> 
> I think XIC contains fewer dividend payers.


James, you do yourself a disservice by keeping harping on this and quoting half-truths. 

Investing in XIU with 2.6% yield is NOT what a dividend investor would want to do. Here are the bottom 8 "dividend payers" in the TSX60:

https://www.topyields.nl/tsx60-best-dividend-stocks/2/

Just one pays a dividend and it is First Quantum with 1c per $14.31 share! The next 8 pay less than 1%. Is that dividend investing? 16 or 17 with next to no dividend??

If you have not actually looked at the dividend payments here is a link (again) that may help: https://www.topyields.nl/tsx60-best-dividend-stocks/1/

Time to move on.


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