Stick to Dividends

You rarely hear investment advisors recommend portfolios based on dividends.  The main reason is because buyers of these types of shares rarely trade, generating very few commissions in the process.  A broker’s sole job is to turn over an account at least once a year, or put investor’s savings into mutual funds and ETF’s, especially if the firm owns and manages them.  These funds are designed to slowly, over several years, to transfer investor’s savings to the brokerage house via commissions and hidden management fees.  If the customer makes money, then it is a bonus.

I have a list of 14 Canadian companies and two American that have raised their dividends for at least the past 9 years.  There are around 80 American companies that have the same record.  It is rare for any brokerage house to recommend these shares.  When they do recommend it is usually because the brokerage house will be underwriting new shares for the company. As a result, the brokerage house will come out with a bullish stance to help unload these new shares.  The brokerage house will earn huge commissions in the process. The brokerage house represents the company not its clients.

In our financial publication we have two shares which we have held since 2004.  Both have raised their dividend once a year this century.  These two have increased in value by 125% since we first recommended them. Two others of our recommendations have also raised dividends yearly.  They have realized a capital gain of around 300%.  Another benefit of holding Canadian dividend paying shares you can benefit from the Canadian Dividend Tax Credit which can lower taxes you owe (this is only available outside of the TFSA and RRSP).  

This is a slow but steady way to increase wealth.  No matter what stock markets are doing, dividends continue to be paid and many companies will increase their payouts.  In severe down markets, like the one in 2008/09, the dividends continued to flow.  There might not be a dividend increase but one still gets an income.  We recommend people enjoy spending some of this money.  When have you heard your broker make this statement? 

If you believe in the future of Canada, you can buy Canadian dividend paying shares and hold through up and down markets.  In many cases you will be rewarded with an increase in payouts.  When a new bull market begins these types of shares move up faster than most companies because of the steady income.

Today, the governments of Ottawa, B.C. and Quebec have closed Canada to foreign investment.  When these negative governments are gone the Toronto stock market will be one of the world’s best performing exchanges.  All good dividend paying shares will join the party.  Hopefully, the new Quebec government will want development in the energy industry.  The previous government was only interested in supporting Saudi Arabia, Libya and other than ruthless countries by buying their oil, rather than supporting Canada by buying Western Canada’s oil and natural gas.