Equities built to last for your portfolio
Inspired by the recent “RRSP season” this post is about some Exchange Traded Funds (ETFs) and Canadian dividend paying stocks that might not win any sprints but will win the marathon that is long-term investing. Why do I think that? Because ETFs are some of the best in the business and less minuscule money management fees, as the market goes, so does the ETFs and your portfolio returns. In other cases, I’ve listed some individual stocks for you to consider for your portfolio, what I consider dividend paying studs that should never stop rewarding investors over time to provide almost bond-like income.
Let’s go.
VTI in your RRSP
The Vanguard Total Stock Market Exchange Traded Fund (VTI) invests in more than 3,000 U.S. stocks. This ETF won’t wow you with yield but based on historical data this ETF will give you long-term capital appreciation. A hypothetical $10,000 investment in VTI ten years ago and held to today would have grown to almost $25,000. You cannot control what the stock market will do but you can control your money management fees. This ETF is one of the best at that. The Management Expense Ratio (MER) is a skimpy 0.04%. For the price and the long-term return it should generate, it’s one of the very best investments for your RRSP portfolio.
XIU in your RRSP or TFSA
The iShares S&P/TSX 60 Index Fund (XIU) seeks to provide long-term capital growth by replicating, where possible, the performance of the S&P®/TSX® 60 Index less minor fees. This Index is comprised of 60 of the largest (by market capitalization) and most liquid securities listed on the TSX. Like VTI, you’re not going to get huge yield (just over 3% yield) but holding this ETF should provide long-term capital appreciation. 10-year returns are close to 9%. The MER on this product is a slim 0.18% – to own the biggest 60 companies in Canada and avoid stock picking all together.
Any Big 5 Canadian Bank in your TFSA or unregistered account
Canadian bank stocks have offered yield and capital appreciation for investors for decades. Personally, I like these companies for yield since I don’t see lots of capital appreciation from the Canadian financial industry in the future. If I’m wrong, well, that’s a very nice bonus. I suspect most investors would do well to buy any of these companies at reasonable prices and hold them until, well, forever.
- Bank of Montreal (BMO) – paid dividends since 1829.
- Bank of Nova Scotia (BNS) – paid dividends since 1832.
- TD (TD) – paid dividends since 1857.
- CIBC (CM) – paid dividends since 1868.
- Royal Bank (RY) – paid dividends since 1870.
Enbridge (ENB) in your TFSA or unregistered account
Enbridge (ENB) is responsible for the transportation and distribution of energy across North America. From an investing standpoint Enbridge has distributed dividends for decades, almost 60 years. Dividends have increased every year since 1996 even through the dot-com boom and bust and the recent Great Recession.
Fortis (FTS) in your TFSA or unregistered account
Fortis (FTS) is the largest investor-owned distribution utility in Canada serving more than 2,000,000 gas and electricity customers. Its holdings include electric utilities in five Canadian provinces and two Caribbean countries, and a natural gas utility in British Columbia. It also owns hydroelectric generation stations in Canada, Belize and northern New York. Fortis has increased dividends every year for almost 40 years.
Why these built to last ETFs and stocks in those particular accounts?
Canadian dividend-paying stocks receive favourable tax treatment from our government; they are eligible for the Canadian dividend tax credit if held in taxable accounts. My plan is to place Canadian dividend paying stocks in these accounts to obtain this tax credit for those investments. I also choose to own Canadian dividend paying stocks in my TFSA to earn tax-free dividend income. I’ll lose the dividend tax credit doing so in the TFSA but then again, the dividends are tax-free and do not affect income tested government programs.
On the contrary, U.S. ETFs do not receive any favourable tax treatment from our Canadian government. With U.S. ETFs in your RRSP however, you will avoid paying withholding taxes. Check out more about dividends and withholding taxes on my Dividends page here.
I recognize I’ve left out other great ETFs and Canadian companies to invest in but these are rock solid investments in my opinion that could fit into most DIY investor portfolios rather nicely. Besides, I can’t list every great company to invest in, in one blogpost. I need to save some content for the future.
What do you make of these choices? Do you agree or disagree?
What great ETFs did I leave out? What rock-solid companies did I leave out?
I personally don’t touch the banks and telco, for ideological reasons. I owned BMO in the past but not now.
I’m simply adverse to these monopolistic money-grubbers.
One ETF or two is always cool to bring some diversification rapidly.
You raise some good points farco. Care to share the one or two ETFs you invest in? I invest in ETFs as well. I’m confident in dividend-paying stocks for mostly income and some capital appreciation but in the end, it’s total return that matters. Doesn’t it? 🙂
Mark,
Wow, those Canadian banks have some impressive dividend histories. Amazing stuff there.
I’m long BNS, TD and looking to add RY at some point. I don’t know how much they’re going to appreciate either, but I’ll happily collect those dividends while I wait!
Best wishes.
Wild eh Mantra? I think owning all five banks are a good move at some point, but I’m biased. Dividends are expected to continue for the foreseeable future, which is fine by me.
I find VXUS to be a great compliment for VTI in your RRSP. In fact, between the two of them and a decent Canadian ETF (used to be XIU, now looking at VCE) that’s all I need!
Good call on the VXUS. I will be increasing my position is this one over time.
I have TD in my TFSA and I am adding BMO or BNS later this week when I get paid.
I don’t have much to invest with because of my ongoing battle with debt (this week the debt is winning) but I am sticking to good Canadian dividend stocks in my TFSA. I also have Shopper’s Drug Mart in my TFSA but we all make mistakes.
I think the bank stocks in your TFSA is a good call, almost bond-like with but higher yields and dividend increases over time!
Other than the Vanguard I have all of the above in my various accounts. And yes all have done well. Still kicking myself over not loading up with BMO when it hit a low of $24. Instead I’ve had to live with the RIM dive. Dollar cost averaging means a breakeven of $17.69 for BB. Other ones that have done well are any companies you love to hate. E.g., Rogers and Telus. Coke has also been solid.
BMO was $24???
Wow. Was that at the 2008-2009 lows?
Yes, good point. The companies we love to hate do make gaggles of money: RCI.B, T, BCE. Damn telcos. Unless you’re a dividend investor 🙂