Three dividend stocks to own and one to sell now
Guest post by Mike Heroux, The Dividend Guy, in collaboration with My Own Advisor about dividend stocks to own.
Mark and I have been fellow bloggers since 2011 as we share a great interest toward dividend paying stocks and love chatting about investing and retirement planning (FIRE, RE, Fi or FIWOOT!).
I really enjoyed Mark’s six phases to financial independence post!
What makes our discussions even more interesting is that we don’t always share the same point of view.
I believe we all learn a great deal when we are sharing and receiving different ideas.
Recently, Mark suggested I write a review about three of his favourite holdings: Bell Canada (BCE), Fortis (FTS) and Bank of Montreal (BMO). To be blunt, I think he should sell one of them!
Let’s find out which one and most importantly, why!
1. BCE (BCE.TO)
BCE is the largest Canadian telecom by market cap, about twice the size of Telus (T.TO). Combined with Rogers (RCI.B.TO) and Telus, all three companies own about 90% market share of wireless industry in Canada. After banks, telecoms are probably the safest industry in the country. With a yield around 5%, I share Mark’s interest for Bell.
Mark shared when he bought Bell and how long he has owned it in this post here.
What I Like About It
On top of its juicy dividend and its position in a strong oligopoly, I also like the fact that all BCE services are based on some sort of monthly subscription generating a consistent base for cash flow. This screams dividend payments. Management has maintained a high (but under control) payout ratio over the past 10 years. While distribution increased steadily since 2010, the cash payout didn’t move much. I think the management team should remain cautious, but there is room for dividend growth.
BCE shows a well-diversified business model and will continue to generate strong cash flow in the future. The company is a real money printing machine. As BCE is part of an oligopoly, there is limited competition and high barriers to entry. Since BCE offers a wide array of products, it can increase revenue generated by each customer.
Where It Could Go Wrong
As much as I like BCE, BCE debt levels are not be underestimated. BCE is a giant…with giant debt. This is not a perfect situation as interest rates are now rising or may likely rise. As the Canadian Government keeps pushing for more competition in the wireless industry, BCE may see additional competitors adding more pressure on margins in the future. BCE will also have to invest massively in 5G to remain competitive. This means lots of money spent outside their dividend growth policy.
My verdict: Hold BCE and cash the juicy dividend!
When you have the possibility to invest in a strong yielder such as BCE and still hope for a small stock appreciation growth, you must take a hold of it. Going forward, BCE may look more like a “deluxe” bond with limited capital appreciation, but a generous and sustainable dividend policy.
2. Fortis (FTS.TO)
Fortis is literally a legend among dividend income investors. This company has successfully increased its dividend for 45 consecutive years. The utility has grown from just $390M in assets when it was formed in 1987 to $52B today.
Mark told me he started buying Fortis almost 10 years ago and has been adding to this company via DRIPs over time.
What I Like About It
Besides its stellar dividend growth policy, there is a lot more to love about this Canadian dividend aristocrat. Fortis aggressively invested over the past few years resulting in strong and solid growth of its core business. FTS is widely diversified on both sides of the border and even have projects in the Caribbean.
By owning Fortis, you can expect this company to continue to grow as it is expanding. The company has a five-year capital investment plan of approximately $14.5 billion for the period 2018 through 2022, up $1.5 billion from the prior year’s plan. Chances are most of its acquisitions will happen south of our border. FTS yield isn’t impressive for a utility (~3.50%), but there is a price to pay for such a high-quality dividend grower. Plus, you can be assured that you will have a yearly paycheck raise!
Image courtesy of Fortis investor relations page.
Where It Could Go Wrong
Fortis remains a utility company. In other words, don’t expect astronomical growth from it unless it goes for more acquisitions. Fortis makes acquisitions in the U.S. in order to continue its growth by opening doors to a growing market (now counts for 66% of its revenue). It may be difficult for the company to grow to a level where economies of scale would be comparable to other U.S. utilities. The risk of paying a high price for other U.S. utilities is also present. Also, the company’s debt is now slightly lower than $23B. At one point, the company will have to put more focus on paying that down instead of growing through acquisitions.
My verdict: Hold FTS for the next 50 years!
Fortis counts over 3.3 million clients spread across North America and the Caribbean; and growing. All of its operations (99%) are regulated. This means their whole business model is protected against price fluctuation. With 45 years of dividend growth, Fortis has proven over and over its ability to run its business while rewarding its shareholders. You can definitely buy those shares and forget about them until your grandchildren discover them!
3. BMO (BMO.TO)
Alright, I said Mark should continue to hold BCE and FTS. That leaves this decision for Mark: I think he should sell his shares of BMO. But please keep reading…
This is Mark’s journey buying and holding Bank of Montreal, a stock he has held almost since day 1 as a dividend investor.
I like BMO, but I think it just doesn’t fit in his portfolio. Who doesn’t like Canadian Banks? The problem is often that we love them too much…
What I Like About It
BMO decided to take the stock market path to help deliver growth. It was the first Canadian bank with its own ETF on the market. Competition is fierce there but being among the first Canadian issuers surely helped building a momentum in a growing market. Over the years, BMO concentrated in developing its expertise in capital markets, wealth management and the U.S. market. BMO also made innovative moves such as the introduction of its own ETFs and a robo-advisor: SmartFolio.
(Full disclosure, My Own Advisor has a partnership with BMO that offers cash back to investors.)
Growth will happen in these markets for banks in the upcoming years. BMO is well positioned to surf this tailwind.
In terms of dividend growth, BMO hasn’t been the most generous bank in term of dividend growth lately. Maybe it’s cautious management as it also shows one of the lowest payout ratios and a healthy yield. You can expect the bank to continue its mid-single digit dividend growth policy in the upcoming years.
Where It Could Go Wrong
Relying on capital markets and wealth management as main growth vectors means BMO can hit a speed bumps more often than its peers. While their fact sheet shows a dividend growth of 8% CAGR over the past 15 years, BMO isn’t that generous anymore. There are more generous banks to invest in. In fact, they are all showing a stronger dividend growth profile! (My source: Ycharts.)
My verdict: SELL BMO! (oh, you just lost me there!)
To Mark and other lovers of dividend paying stocks, should you really sell a gem of a stock such as BMO just because its dividend growth lags behind? Not at all. The reason why I think Mark should let go of BMO is simply because he owns many other banks too. While BMO would not be my #1 sell among Canadian Banks (Laurentian Bank (LB) and Canadian Western Bank (CWB) definitely are), there are better opportunities such as Royal Bank (RY), National Bank (NA), and TD Bank (TD).
I know Mark owns all big five banks, he might even own National Bank (NA). (Mark: I do).
I believe if you own 4, 5 or even 6 of the “big six” you are practicing diworsification to your portfolio. While Canadian banks have outperformed the market for as long as I can remember, they are still part of the very same sector. This means that a single event such as a housing bubble burst, and oil crash, an interest rate drop, a very bad credit cycle will hurt this bank and your portfolio at the same time. If you keep financials below 25% of your total portfolio, you won’t get hurt too much. But if you keep financials above this amount and beyond 40%… it’s a different game. Don’t say I didn’t warn you! ?
How about Intertape Polymer? (ITP.TO)
Following’s Mark taste for modest to higher yielding stocks, I’d like to discuss Intertape Polymer as a possible addition to any Canadian income seeking investors. Intertape Polymer Group Inc. manufactures and sells a variety of packaging products. The firm’s primary product categories include tapes, films, and woven coated fabrics. The company’s tapes include pressure-sensitive and water-activated carton sealing tapes, and flatback, duct, double coated, foil, electrical, and filament tapes. Intertape’s film products include stretch wrap, shrink film, air pillows used for protective packaging, and packaging machines. The woven coated fabrics include building and construction products and specialty fabrics. The majority of revenue comes from the United States – that provides some built-in diversification!
What I Like About It
With the rise of online shopping, the packaging industry should benefit from this tailwind. ITP expects to reach $1.5 billion in sales by 2022. Intertape is #1 and #2 in its main market in North America and shows international expansion opportunities. Management also expects to grow by acquisition to expand its current line of products, consolidate its activities, and open additional doors in international markets. In August 2018, the company completed the acquisition of Polyair Inter Pack for $146M. This was a strategic move to expand ITP product offering while opening doors to cross-selling opportunities to PIP’s clients.
ITP dividend more than doubled over the past 5 years and if you are Canadian, the ITP distribution is delivered to investors in USD $$ (if you are looking for your Florida budget, it’s a nice addition)!
This is Mark’s awesome list of Canadian stocks that deliver U.S. dollars dividends.
Now, ITP doesn’t always increase its dividend as it keeps cash for more acquisitions. Still, the 23% dividend increase over the past 5 years combined with its yield of ~4.50% makes it a good candidate for any retirement portfolios.
Where It Could Go Wrong
During the latest financial crisis, ITP traded under $0.50. The company was on the edge of bankruptcy and management finally patched its boats and it stopped leaking. Numbers may seem great today, but I would remain cautious as the wind could turn quickly during a recession. The company’s success is linked to a strong economy and its growth by acquisition strategy.
Thanks Mike. Like you mentioned above, it’s great to compare notes and discuss how we invest, even if we don’t agree!
Mike is passionate about investing and we discuss investing offline and online often. I hope to have Mike back on the site again soon where we can compare notes on other stocks we like or wish to buy – and why!
Mike is so passionate about investing, in 2016, he took a leap of faith and left everything behind to travel across North America and Central America with his family. I profiled Mike earlier on my site here – why his goal to live off dividends and distributions remains alive and well!
After driving through nine countries and staying three months in Costa Rica, he returned home to become a full-time entrepreneur. He quit his job as a private banker and put all his energy into Dividend Stocks Rock. Continue your reading here with how he invested a lump sum of money in 2017 and how he continues to find stocks that rock for his financial freedom journey.
All the best Mike and thanks for your take on some stocks in my portfolio.
What do you make of Mike’s feedback? Should I consider selling BMO? What about ITP?
I keep all my Canadian dividend growth stocks in the taxable account. I don’t play favourites and I own all five of the largest banks at 18% of this portfolio. As long as they continue to increase their dividends I have no plans to sell any of them. I also own Canadian equities in five other sectors/industries, Consumer, Pipelines, Industrials, Communications, and Electric Utilities. Sold Shaw Communications recently since I got tired of waiting for another dividend increase that was not forthcoming. Although I own it, not keen on Rogers either since aside from an increase this year, it hasn’t been consistent with it’s dividend increases over the last few years.
I see. So, CDN stocks inside taxable (makes sense, I do that too). All my five banks are also in taxable.
I have the same philosophy. As long as folks are getting 84+ month car loans and McMansions I will continue to own CDN bank stocks.
I also ditched SJR.B many years ago. The family-run business scared the heck outta me!
Are you able to live off your dividend income to a degree Taggart?
I actually just got a 48-month car loan at an interest rate of 0.99%. Not sure the loan agency actually makes money or not. So now I am in debt again.
Gotta live your life! 0.99% financing is not a big deal – just don’t finance things you cannot afford like some people. I don’t think that’s you!
I keep hearing about the next DOWN turn. Time to take your gains, that kind of talk.
Do you have any thoughts.
And when should you take your gains.
Honestly Jim, I’m not taking “any gains”. Although my portfolio is up ~ 20% this year, I continue to stay invested. I’m doing so because I plan to “live off dividends” in a few years and I will need every penny in my portfolio that churns out dividends to keep doing so – since I don’t want to sell assets from my portfolio during the early part of retirement or semi-retirement.
That’s our plan, but I can appreciate that’s not the same plan as others!
No reply on the next DOWN turn
Good to see that Mike has finally seen the light and likes BCE over Telus. LOL
Had lunch with him a couple of times, we live fairly close and who wouldn’t like St. Hubert, and at the time he was in to T. I asked why one wouldnlt prefer BCE over T as BCE paid close to 1% more divs than T and while the usual spread between COP was $8-$10 it has recently grown. The time to buy was just a short time ago when BCE dropped below $55. I recently sold close to 4K of BCE when it went over $65. It si on it’s way back up so I will bide my time before a buy in. Someplace below $60 will be nice.
As to BMO well I purchased them at approx. $57.25 so an approx. 7% div on COP is not too bad.
Never owned Fortis and I would want a slightly higher dividend before a purchase.
With the BCE sale I went from around 2% cash to 37% cash. Have re-invested some now as Mike does not like to have unproductive cash lying around but I am still quite high, for me. Also bought some CGL, gold, before it just dropped. It is a back up for me as I am now retired. Only problem is it does not contribute anything to my income unless I can sell it at a gain.
Too funny. I hope Mike paid for lunch? 🙂
For me, I stay invested in both BCE and T. No plans to sell either and simply reinvest the dividends every quarter. Very boring I know Ricardo but that is helping this income machine grow slowly over time:
With BMO, I don’t think I will sell at all. I plan on holding BMO and all CDN banks in fact until they stop paying dividends (let alone stop increasing them).
Any plans to buy something for your 2020 TFSA?
The only things I am looking at at present are RUS, IPL and CHE
Div payouts are quite high but also a bit on the riskier side. Have owned IPL since 2003 when I bought a significant holding @ $6.90
Have added to it over the years and it is now my top holding percentage wise.
Compounding my returns over the years have led to an ever increasing return from the registered accounts. Unfortunately I might have to initiate a drawdown next year or the mandatory conversion to a RIF the following year.
I worry about IPL. Still DRIPping but not buying more right now otherwise. CHE, is a maybe for me. What are your drawdown plans? How much per year? Curious 🙂
I still prefer Telus over BCE, but I always said that both of them are great holdings. Depending on the year you buy them, one is better than the other (and it keeps changing! haha!).
Well I did buy “T” a few months ago but it was AT&T @ $32.1US
Nice 6% div.
I notice that Telus is catching up to BCE on the dividend payout so just maybe I’ll look a little closer at them.
FWIW, we own a few hundred shares of both: T and T:US.
Mark, I don’t see a problem with holding the 6 largest Canadian banks to cover your bases rather than taking a stand on 3 or less. That said I do agree with Mike that its probably in your best interest to keep your financial content to 25% or less. Personally, I prefer and own TD, RY & BNS and have between 20-25% in financials overall.
I’m working at keeping our bank/financials down more over time. In fact, all new monies to be invested are going into telcos and/or utilities for 2020. That’s my TFSA approach I will write about anyhow in the coming weeks and months. Thoughts on that?
Mark, I’m retired so I can’t really suggest any specifics. My portfolio is globally diversified with roughly 20% Cdn, 30% US, 15% Int’l equities and 35% fixed income and equivalents. I don’t follow it closely anymore.
That seems like very good global diversification Bernie. You’re covered for various storms and long-term growth!
I think so Mark, we also should be well covered for yield and dividend income growth.
🙂 Sounds like a plan.
The most important point is indeed to not let the 6 banks weight too much in your portfolio. If you want to hold all 6 of them, you may as well buy the BMO ETF for it and save on transaction fees. But that’s a minor detail compared to having 40% of a portfolio in a single sector for example. I don’t know what they represent for Mark, I just took the guess that buy holding so many banks, he is probably over 20-25%.
Mike, you’re right. I am over 25%. BMO alone makes up 5% of the portfolio. VYM is our largest holding at 10% in the portfolio.
I don’t bother with the BMO ETFs or any equal weight bank ETF, etc. since I pay no ongoing money management fees to own my 6 bank stocks or BCE or FTS for that matter. I think unless these companies stop paying dividends, I will continue to own them.
Oh, I should add. RY and TD are my largest CDN bank holdings at 6% each.
Thanks for the timely article. I enjoyed it a lot.
I am facing that decision right now, as I want to withdraw a lump sum from my RRSP (which has all of those stocks) and are trying to decide what to sell. I could buy it right back (minus the hefty withholding tax) in a non-registered account, but still it is a decision (I am very indecisive!).
Although it could also be Telus, given my unhappiness as a home (not wireless) customer. After my complaints the other day, it was funny because on Saturday a guy came to the door trying to sell me on more Telus services. He was shocked that I would pay a penalty just to be rid of them.
You could always just do an in kind transfer from your RRSP/RRIF to your non-reg account. I do it quite often as I’m trying to drawdown my wife’s RRSP and my RRIF to reduce the long term totals taxes. You still pay the taxes on the transfer as it is considered income but there’s no fees to do it (at least not with RBC Direct Investing).
Don, you are right, that could be an option. Would have to find out if there were fees with iTrade to do that. But I kinda worry about them handling such a transaction….sigh. I had trouble last year with a very simple withdrawal, over whether the taxes would be taken off the amount or added on to the amount, I was withdrawing.
I think at the end of the day our telcos in Canada are going to continue to pump out dividends…juicy ones and I suspect more BCE and T increases are coming in 2020. Just my take!
Do you need income from your RRSP or are you withdrawing because your RRSP has been transformed in a RIF? I’m trying to understand why you would pay taxes on withdrawal to invest a smaller amount of money right after.
No I don’t need the income and am not near an age when I am required to convert to a RRIF. About 6 years ago I started withdrawing chunks from my RRSP because I didn’t have much other income (I did own a rental property that always made positive income). Just as a way to smooth out the future taxes. But by now my cash investment account is churning out quite a bit of dividends, so I have to consider how much I should withdraw and the tax impact. Perhaps I should leave it all intact. Something to thing about more in the next couple of weeks.
I am happier knowing what my savings amount to after tax and that is so much easier when they are invested in non-RRSP/RRIF accounts. I can look at my cost basis and know that is all tax free, along with the TFSA. I do want to leave money for my children and not have it mostly taxed away.
Smart move! When you can withdraw money from your RRSP during lower income years, you save (again) on taxes! Unfortunately, you must do the calculation each year to make sure it’s the right move :-).
One thing I find quite amusing is how many people say that you shouldn’t try and time the market and then they turn around and recommend selling/trimming certain stocks at certain times. Similarly, I also always love the “dry powder” argument where you should keep some cash so you can invest when the market corrects.
As I long term buy & hold and stay fully invested guy, I think both of those are versions of trying to time the market. As long as a company continues to pay their dividend, I don’t sell.
As an aside, my wife and I own BCE, FTS, BMO as well as a bunch of other dividend income/growth stocks.
Same Don – took me years to figure this one out and try and stay disciplined:
“As long as a company continues to pay their dividend, I don’t sell.”
As for my stocks, my biggest CDN holdings are listed here:
I’m very tempted to buy more EMA and other utility stocks if those prices keep coming down before January TFSA contributions.
It’s quite interesting that both EMA and FTS seem to be “correcting” but AQN, BEP.UN, and NPI are still doing quite well price wise. Not sure if it is :conventional” vs “renewable” or what?
I think EMA will be done correcting somewhere in the $50-51 range and then it will be a great paying opportunity.
I know, I found that odd…? DRIPing a few shares of EMA, FTS and AQN each quarter. Looking at EMA for 2020 TFSA for my account or my wife’s. Then looking at some NPI or INE for the other TFSA. Hoping EMA stays around $50 for January 2, 2020 TFSA contribution and purchase. That should buy about 120 shares. We’ll see if I get my wish!
Your wisdom has reconfirmed long term buy & hold and stay fully invested. With all the bear market rumours looming, I was tempted to sell everything in my registered accounts and sit on the cash to buy back when prices bottom out. But who knows how long that could be, possibly 4-6 years?Sitting on cash would not be wise. Trying to time the market, although tempting, is unwise.
You need to be right twice, sell near the top and buy back near the bottom, which is almost impossible.
I think Asset Allocation is kind of timing the market but in an easier way. With AA and rebalanceBasically you will buy when market is low and sell when market is high. So I will not sit on cash but I will not be 100% equity either.
Good to hear on reconfirming your buy & hold and stay fully invested approach. There are so many people trying to time the market, even though they don’t actually think they are.
There’s a couple things I find particularly interesting in the “timing” strategy. The first is that you can get your timing right 3 times out of 4 (or whatever) but the one time you misjudge often undoes all the times you got it right.
The second one is that people often seem to be way too early on their predictions of a market correction. This has really been going on a lot in this current up cycle. Think back to how often you’ve heard dire predictions since 2010 or so. If you had listened to any of them, you would have missed out on one of the best investing periods in a long time.
The third one is that if you are a dividend income/growth investor, then you are giving up income any time you are out of the market.
One additional comment on our investment strategy (and this is no slight on May’s comment) is that we never re-balance or trim. I have enough confidence in what we own that we just let it all ride. We never worry about current percentage of any given stock of our entire portfolio.
Lastly, I’d like to add that investing the way we do has to be one of the most stress free ways to manage a portfolio..
As I’ve reaffirmed that I am a dividend income/growth investor (thanks to Mark’s educational blog), I’ve decided that I don’t want to give up income by being out of the market. I don’t trust my timing strategy to predict a market correction.
I do not re-balance or trim my investments either, nor do I worry about percentages of any given stock. I let it ride as well.
I’ve reached a milestone today with my entire portfolio with this current upcycle that I NEVER thought I’d ever see in my lifetime. I’m happy to report that today I’ve broke the 1/2 million mark! (it sounds better than 500k) What is even more pleasing is that I retired almost 1 year ago with a defined benefit monthly pension without touching my dividends to supplement my expenses. I never thought this would be possible and I fully expected to be cashing out part of my RRSP. Mind you I Iive in small town Manitoba where my expenses are minimized by reasonable cost of living and limited shopping/entertainment. Other than travel a few times a year and perhaps a new/used car down the road, I’ve managed to make ends meet with 70% of my previous salary.
I also have to admit that I am totally self taught with the knowledge/education from Mark and others on this forum. I’ve done minimal reading(Wealthy Barber, Cannew’s book), I have a very informal budget, I have no charts or graphs or records other than my brokerage statements. I lived through the 2008/09 market crisis which is when I took over my investments from my financial advisor. I realize it’s been a bull market for the last 10 years, so I don’t expect my milestone will last too much longer. But it still feels great to get there !!!
A huge congrats to you!! It sure looks like you have your ducks in a line on the investing front as well as an excellent set of life priorities. Good on ya’.
That’s cool on being self-taught. I’m the same as well and agree that Mark’s excellent website and poster forum/comments has been a big help.
All the best
Just awesome Bonnie – and thanks to great and very educated (and dedicated) readership like you and others Don G!!
For long term, I am sure 100% in equity like what you are doing with give highest return. I am just not brave enough.
We’ll see May 🙂 ?
I too am happy to own all 3 of these representing approx 4.5% of our overall holdings.
I get what DivGuy suggests re sector allocation and being wary of heavy reliance on financials here in Canada. Although I’ve looked at ITP before I’m not sold on it at this point. I’d like to make some more Canadian equity purchases but having a hard time finding good value in the areas I’m currently interested in- REITS, pipes, utilities, telecoms.
Hi, RBull, didn’t see you here for a while. You are certainly being missed by us.
I have a small position in ITP and still underwater. ITP reported quarterly results yesterday and it’s down today due to revenue miss. I actually want to buy some ITP in my taxable account in order to get some dividends in USD. Not brave enough to pull the trigger yet.
I have bought some shares recently as my FI is exceeding my target due to accumulated cash from payroll and investment income. So I tried hard to find some not so expensive stocks and forced myself to buy.
Ya, we’ll see on the ITP for me. Another option for USD $$ dividends though!
Thanks May. I was away for nearly a month and decided not to spend the money to be connected.
Good to see you’re sticking to your plan. Over the long term it will pay dividends. Pardon the pun!
I’m of the same ilk…I believe banks, REITs and utilities will be key for my semi-retirement from Canada. Throw in some ENB and TRP and we’re good. IPL is a wildcard right now for pipelines. We all know the top-3 telcos to own, or at least 2 of them 🙂
Yep. Mine too. I need more!
My wife & I are totally invested in TSX listed dividend growth/income stocks in just those 5 sectors – banks, utilities, REITs, midstream, and telecom. No bonds, GICs, or fixed income or company pension.
6.5 years into retirement, it continues to work like a charm!!
Pedal down Don G! Well done. The bigger question is….if/when we have our market meltdown will you keep the same strategy? “Live off dividends” or other?
I hope to myself but time will tell if I have the guts!
Thanks for the reply.
We will guaranteed keep exactly what we are holding. It’s almost sort of embarrassing in a way but we have close to 3 times as much dividend income as we need to live off so there’s no reason to sell just because of stock price. If a company eliminated their dividend completely, then we’d sell and buy another dividend paying company. If it was a 50% cut, I’d evaluate it on an individual case.
Jeepers…that’s insane but also amazing at the same time. I hope I can “get there” like you Don!!
I have all six banks and actually wanted to switch BMO, BNS and CM (more of these right now) to RY, TD and NA for a while. Didn’t find an opportunity yet. The previous three were almost always cheaper than the later three whenever I wanted to buy some bank shares. Well, I guess there is a reason for that.
I own all 6 banks FWIW, in various quantities of course.
Daniel, I am not sure you fully understand RRIFs. When you convert (mandatory at 71) you will be cashing in a growing percentage every year. You will pay full marginal tax on it by the end of the tax year. I flip my annual payout into my TFSA. Thus the TFSA grows as the RRIF shrinks. But play the dividend and growth right and the RRIF becomes a perpetual money machine, assisting the TFSA to grow.
I hear more and more seniors are doing that DougP – smart stuff – move any excess money not needed for living expenses from RRSP or RRIF to TFSA and max out that account every year 🙂
DougP, thanks for sharing this info….exactly what I’m looking for and i like how the Riff can become a Money machine if you have the right stock portfolio…..never thought about it like that.
Come Jan 2020 will use the Riff minimum withdrawal to my TFSA and let the Riff accumulate growth and dividends.
Again, not advice, but it’s certainly a strategy I have shared with my parents since they are approaching the age whereby holding the RRSP account is no longer an option = must be converted to RRIF or other.
I have told them if they don’t want to spend the RRIF money (they probably will), they can have the RRIF $$ deposited to their TFSA directly via transfer “in-kind”.
On that note, some notes as FYI:
-any funds taken out of the RRIF irrespective of where they are then moved to (including a TFSA), are taxable as income.
-this means using an “in kind” approach or cash withdrawal directly does not change the tax liability.
-if you are only taking out the minimum required amount there is not any tax withheld by your financial institution. It will be included as taxable income for current tax year and this must be noted when you file your current year tax return.
Finding value in this market is tough !! I think I would buy Telus before BCE …However both have solid ground to go forward .
On a different note , IPL, looks good as a value play once there largest project in history is finished (Heartland project) in 6-8 months . Massive EPS increase for them once open !
BPY.un is a Brookfield name that trades under their NAV . The only Brookfield name that does so . Major expansion has driven earnings to lower levels . However its 100% worth a look too!
Happy investing !
Interesting, I recently added Telus, IPL and BPY.UN to my portfolio.
I also like BPY.UN and have owned a few hundred shares for a few years now. I might have Mike back on my site to share more stock insights that I should or should not own. We’ll see if I listen to him on BMO! Right Mike? 🙂
Start by selling CM over BMO 😉 hahaha!
LOL. I knew you were going to say that 🙂
I love this type of post, not just for the valuable insight, but because we all need to remember that there is more than one way to skin a cat!
As a retired old fart focused on dividends, I hold some of the same names as you but also a few that neither of you list. It would be nice to see more of these type of posts and I would look forward to seeing your thoughts on Hydro 1 (H) as a “bondish” stock similar to BCE.
Thanks Rich. Nice to hear from you. Hydro One is “bondish” as you say but I don’t really like it as much as other utilities because our government has their greasy palms in ownership still. Not good!
Hydro is good, but utilities like Fortis (FTS), Emera (EMA) and Algonquin (AQN) look like better options imo. However, Hydro’s dividend is safe and it will continue to grow faster than inflation. That isn’t bad :-).
I own all of those (via my RBC Candian Equity fund), however the only individual stock of those above that I own is ITP. I’m still waiting for it to break out….but i’ll keep collecting the dividend until then.
Candian Western Bank is an interesting one. I’ve followed it quite closely, and used to own it. I feel it’s one that you can swing trade, buy between 25-28 sell when its over 30. Long term buy & hold though, I would definitely prefer TD or RY.
Good to hear from you. I never considered CWB myself due to the oil risk. I had LB a long time ago but sold and bought more TD because they (TD) continue to grow their U.S. operations and people are money hungry there for debt.
CWB actually has very little oil and gas exposure. I think last year they said 1.5% of their book was oil and gas. They’ve expanded east into commercial leasing and other areas. Every time oil goes down they get dragged down with it but have very little exposure. They havent lost money in like 27 years. Dont be fooled by the name, it’s a well run company with more modern systems than any big bank that allow it to rate products and measure the risk
Humm, interesting. I haven’t looked into CWB deeply; I always thought they had more exposure to the O&G industry. Good to know. I assume you hold for dividends and a bit of growth?
They’ve diversified quite alot in the past 3-4 years. More wealth management too. Like Moneymaster said, CWBdrops to mid 20s every so often- I’ve bought several timesaround 21 and have a nice DRIP going. I’ve owned since about 2013
Humm, interesting…thanks for sharing Geoff!
Thanks Mike and Mark…good post. I’m a lazy investor. As the longest paying dividend company in Canada and still going strong, I love the income from BMO. It’s here to stay. I’ll look at Fortis when I switch my RIF to TFSA in January.
Those are definitely three strong picks for most dividend growth investors. Banks, telecoms and utilities are probably the strongest sectors in Canada. Strong and reliable!
I love those sectors due to their wide moats in Canada. And I’m expecting divvies from those sectors to form a significant chunk of my retirement income. However, I do hope for a long (40+yr) retirement but do have concerns how things will evolve over 4 decades. The banks have done really well over the last few decade. While they froze their divvies for a year or two after the financial crisis, they didn’t cut them. I am concerned about if their profits will become eroded by fintech. Telecoms have had a good run and I suspect it will continue with 5G and the IoT world. But they are so susceptible to (1) flinging the door open to foreign competition and (2) technological change. BCE’s share price and dividend was really stagnant during the turn of the century until all the growth from wireless finally kicked in. Telus had it’s share price plummet and cut its dividend in order to restructure the company to focus on wireless. A similar situation would be pretty disheartening for me in retirement. I’m enjoying the ride for now but also cognizant we haven’t endured a really difficult situation with these divident stars in a while.
BTW, sorry, just in a black cloud mood of late.
I’m with your Millhouse – re: fintech. I think banks will evolve but their historical margins will be eaten up some over time.
As long as the stocks I own (banks or otherwise) continue to pay and increase their dividends I’m not worried.
Like you, I’m enjoying the dividend ride which is why I try to diversify beyond Canada’s bank and telco boarders with U.S. ETFs. If hundreds of U.S. stocks all go under at the same time, I feel humanity is likely doomed anyhow.
Same arguably for Canada. If most of the TSX 60 goes under, at the same time, we have much, much bigger issues to deal with!
Hi, you mentioned switching your RIF to TFSA in Jan…I also am looking at this, or at least a portion of my RIF to my TFSA. Would you not be paying a lot of income tax if you cash in your RIF?
Looking at the rules you will be taxed at 10% for 5000 dollars which is not all that bad, but the percentage increases as you withdraw more RIF dollars.
It all comes down to pay now or pay later. I plan on shutting down my RIF slowly every year…..I don’t have a big amount in it.
Please share your thoughts. I would like to eventually have all my money in the TFSA (the wife also) and only pay income tax on my company pension.
Indeed. Pay now or pay later. The government wants their RRSP-generated loan back. I feel this is the linchpin in any TFSA vs. RRSP debate that most investors don’t consider:
I think if you have a small RRSP value, it absolutely makes sense to get that money out sooner than later (smooth out taxes while doing so – don’t have a big tax year mind you) and put said monies into TFSA for tax-free growth.
Me too Paul, it’s going to be hard to follow Mike’s suggestion but I’m certainly open to hearing different points of view! I enjoy Mike’s site and articles for that.
This is why I find investing so interesting; many different points of views and strategies and many ways to reach investing goals. We can be both right for different reasons :-).
You bet my friend. I always liked your fresh take on things and why the status quo in any investment should be questioned now and then.
nice post guys.
Still dont own fortis but utilities have become my top sector after their run up. I’d love to own fortis eventually.
I’ve always debated selling my tiny stake in bmo and moving it to national. (got to get that one to drip)
It’s hard selling those banks though!
nice pick with itp.
keep it up guys
FWIW Rob, I have the top six banks in my portfolio and have for many years now. I also have FTS, EMA and a number of other utilities? Too much? Maybe but I love those dividends flowing in!
Yes, interesting call with ITP for sure. Not very recession-proof is my only concern with that one.
It’s never too much until that sector is hit by a plague 😉 Imagine if your holdings were 6 us banks in 2008 instead of Canadian banks :).
Fair. Need to increase my non-bank exposure including more U.S. assets!
Own all of them but would not advise others to consider them without first doing their own research. Same with selling, never just listen to others but if you own the stock, look at the income it provides and access if the income will continue and grow to suit your expectations.
I totally agree with you; one must always do their own research before doing anything. I just wanted to open the discussion on sector allocation :-).
Good point cannew. Don’t take my word or anyone else’s word for that matter as gospel. People need to think on their own.