(This was originally published in the July 2017 version of The Dividend Growth Newsletter. It is available here.)
When it comes to investing, the old adage is that past performance does not indicate future performance. While that is certainly true, past history isn’t completely worthless. Both the stock market and the events of world history move in cycles, so what happens in the past can happen again. Forward looking statements are educated guesses at best, but, as they say, hindsight is 20/20.
Consider this article by investor Nick McCullum, who showcases a chart (left) by Ned Davis Research that shows the historical return of dividend-growing stocks (9.6%) outpacing both non-dividend stocks (1.7%) and the S&P 500 (7.3%).
Dividend aristocrats also experienced lower volatility compared to the index, and because only established companies with enough cash flow can consistently pay (or raise) dividends, they’re also considered to be safer investments as well. Considering that stocks are at record highs, dividend stocks remain a prudent investment.
(This was originally published in the June 2017 version of The Dividend Growth Newsletter. It is available here.)
Here’s a fun stat: The S&P TSX had the fourth-worst performance in the first half of 2017, returning just 0.69% (see left), finishing only ahead of Israel, China, and Russia. South Korea leads the pack with an 18.03% return, and only two countries (the U.S. and Spain) outside of the Middle East and Asia finished returned more than 10%. According to BNN, Canada ranked 91st among the 103 indices that are tracked, thanks to huge declines in the energy sector with low oil prices.
That hasn’t stopped prognosticators from predicting a huge rebound in the second half, citing more appetizing equity valuations. A rising loonie will help certain sectors, including grocery chains (such as Metro, Inc., which is featured in the Canadian Dividend Aristocrat Portfolio), and a Reuters poll showed that many believe the TSX will reach new highs by mid-2018… but we all know how wrong polls can be.
In times of poor overall returns and further geopolitical risk with North Korea’s constant missile experiments, dividends are once again attractive investments for their steady dividends and high yields.
(This was originally published in the March 2017 version of The Dividend Growth Newsletter. It is available here.)
Donald Trump has been called many things since assuming office. Most are critical of his methods and choices, and his waning popularity is a symptom of that. But here’s another word: tiresome.
Trump has been in office less than four months, and yet Barack Obama’s presidency feels like it’s in the distant past. The 24/7 news cycle is ruthless; Trump is polarizing, if anything, and no other president has ever felt so pervasive. I mean, has the failure of any TV show ever been singularly attributed to the President of the United States?
Trump’s lack of political experience is hampering his ability to deliver on his promises, especially when it comes to big tax cuts. The S&P 500 jumped eight points the day Trump was sworn in, and over the next two months climbed to almost 2,400 points, an all-time high. The Dow saw a similar spike, reaching an all-time high in early March. Optimism has waned, however, and over the past month, both indices have pulled back, declining roughly 1 per cent and 1.5 per cent, respectively. The status quo has changed from a corporate-friendly administration to one that may be impeached.
In this type of environment, stable dividend stocks seem all the more logical and worthwhile. Stock prices can be difficult to stomach, but these are companies that have weathered all kinds of presidents, and continue to deliver predictable dividend increases and yields.
As promised, introducing the new and improved The Aristocratic Dividend Growth Newsletter! Please click the link below to access.
(This was originally published in the January 2017 version of The Aristocratic Dividend Growth Newsletter. It is available here.)
… Opening in 1928, the Aristocratic Restaurant and its mascot, “Risty,” were an institution in Vancouver for the better part of a century. At its peak, the famous burgers-and-fries diner had a dozen locations across the city, and nowhere was it more popular than at Broadway and Granville, where it served locals who frequented the nearby theatres and waits for tables had to be endured. When the site was redeveloped in the 1990s, the Aristocratic was forced to close its doors, but the nostalgia never faded, and a miniature replica of its once famous neon sign still sits there today.
The Aristocratic Dividend Growth Newsletter harkens back to its namesake. The companies featured in this newsletter are known as dividend aristocrats, meaning that these companies been paying consistent and gradually increasing dividends for at least 25 years. The aim is to provide investors with a portfolio of long-term oriented companies that have the ability to provide stable returns.
(This was originally published in the November 2016 version of The Dividend Growth Newsletter. It is available here.)
Canada’s Inflation Rate was 1% in January of ’15 and rose as high as 2% in January of ’16. In September, it was 1.3% and will likely rise a bit more towards the end of the year.
If your money was in a Savings account earning 0.80% or less, you’re actually not saving.
If your money was in a High Interest Savings Account earning 1.5% and you are paying income tax on the interest, you are still not actually saving.
If your money is “laddered” in five GICs with ⅕ coming due each year over the next 5 years, and your average interest rate is 1.80% and your marginal tax rate is 27.5% or less, you are breaking even.
If your money was invested in the WORST performing dividend mutual fund over the past 5 years and earned an average of 1.32% per year, and your only income was $50,000 in eligible dividends, you paid no income tax and broke even against inflation.
Could you imagine how much money you could SAVE if your portfolio performed better than the average dividend mutual fund?
(This was originally published in the October 2016 version of The Dividend Growth Newsletter. It is available here.)
Not only are dividend-paying stocks popular because they can be a source of consistent income, they are also an excellent gauge for a company’s success. Dividends are paid out from retained earnings, and only those that can grow their earnings can afford to pay and raise their dividend each year.
From the issuing company’s point of view, it’s a gesture of gratitude to their shareholders and a way to attract more investment into the company.
A history of consistent and growing dividends is a strong indicator that the company is financially successful; in turn, successful companies make for good investments.
As investors take advantage of these investments, this demand naturally drives up the stock price, further reinforcing the idea that the company is in excellent standing.
(This was originally published in the September 2016 version of The Dividend Growth Newsletter. It is available here.)
The hard truth is that almost no one becomes a millionaire overnight. Get-rich-quick schemes are just that – schemes that get you thinking about bags of money, but not the consequences when things go awry.
Warren Buffett’s considered the world’s greatest investor and he never won the lottery. His method: compounding money every year over a long period of time. A cursory look at his portfolio reveals that his biggest positions are in four dividend-yielding stocks: Kraft-Heinz, Wells Fargo, Coca-Cola and IBM.
Compounding is powerful because investors can earn interest off their own interest. Dividend Aristocrats have the ability to provide average returns of 10% a year while providing the safety and yield that other non-dividend paying stocks fail to do.
According to the Globe and Mail, the average Canadian household savings rate is at 3.6%. If you make $50,000 per year, you will save $1,800, and at a 10% return on your investments, it will take 42 years to become a millionaire.
Take, for example, Ronald Read, a Vermont gas station attendant who amassed an $8 million fortune by living frugally and avoiding fads and bubbles. Among his 95-stock portfolio, he owned Dividend Aristocrats such as Procter & Gamble and Johnson & Johnson.
(This was originally published in the August 2016 version of The Dividend Growth Newsletter. It is available here.)
What if we were to define retired persons as people who no longer need to keep saving money in order to live the life they want? Retiring early means amassing savings derived from both active income and passive income – as quickly as possible.
The secret to a faster savings rate is to increase passive income starting today. Ongoing increasing passive income offers additional peace of mind and a buffer in case retirees outlive their retirement plans.
Investing in Dividend Aristocrats offers a diversified, lower-risk method to consistently increase passive income.
Case in point: 10 years ago, Coca-Cola’s quarterly dividend was $0.16 with an annualized dividend yield of 2.91%. Today, that dividend is now $0.35 with an annualized yield of 3.22%. It doesn’t seem like much, but at $21.92 per share on Aug. 4, 2006, the dividend yield based on cost today is now 6.38% and passive income has more than doubled over the past decade!