Top Canadian stocks to buy and hold – forever
Warren Buffett once said, “Our favorite holding period is forever.”
Well, another famous person also once sang, forever is a mighty long time…
Inspired by various articles over the years, and in revisiting some of my very own longest-held stocks, I thought I would publish a post related to my favourite top Canadian stocks to buy and hold, maybe forever.
I look forward to any changes or additions to my list from you in the comments section!
Top Canadian stocks to buy and hold – forever
John Heinzl from The Globe and Mail recently wrote (subscribers only):
“One of the biggest investing myths is that you have to put in a lot of work to achieve great results. Without exhaustive research and a knack for savvy trading, you’ll never build lasting wealth and achieve financial independence, or so many investors believe.
Nonsense.
To become a successful investor, you don’t need to study technical analysis charts or jump on the latest investing trends. All you have to do is identify solid, established companies – ones with growing sales, earnings and dividends – and hold them through thick and thin.”
I echo that sentiment.
As a dividend investor with nearly 15 years of DIY stock experience, I can claim that while good investing tends to include buying and owning good companies or at least a collection of good companies, great investing often has to do with buying and sticking to what you know with utmost conviction.
Behaviour trumps all.
Here is a financial nugget to remember about the power of compouding, from The Psychology of Money:
“$81.5 billion of Warren Buffett’s $84.5 billion net worth came after his 65th birthday.”
Phenomenal.
Yes, Buffett is one of the best investors of our time, maybe any time!
But the key point here is that while Warren Buffet is often cited as one of the greatest investors, the time that Warren Buffett has remained invested in so many companies has been his secret wealth-building superpower.
So, that lesson to me was made clear years ago: if you want to grow your wealth, the longer you can invest your money, earning good returns from good companies over time, that’s when compounding runs wild.
Yes, stock prices will always bounce around in the short run. However over the long run, if you own dividend growth stocks, buying and owning some great companies should reward you with capital appreciation and rising dividends. Win-win.
Top Canadian stocks to buy and hold – forever
There are quite a few dividend paying stocks in Canada but the ones that provide steady dividend increases and those companies that have been paying dividends for decades or even generations is actually a short list.
In that spirit, here is a list of Canadian dividend paying stocks that have friendly dividend histories, ones I would consider buying and holding for years and years on end….
Big Canadian banks (financials)
These stocks have been the foundation for Canadian mutual funds, ETFs, DIY portfolios and institutional portfolios for decades, in some cases generations. Although recent stock performance history will differ for each company below, I would consider some of these stocks as buys and holds, to build the rest of your dividend portfolio around:
- Bank of Montreal (BMO) – paid dividends since 1829.
- Bank of Nova Scotia (BNS) – paid dividends since 1833.
- TD (TD) – paid dividends since 1857.
- CIBC (CM) – paid dividends since 1868.
- Royal Bank (RY) – paid dividends since 1870.
- National Bank (NA) – paid dividends since 1980.
From my particular list of financials above, I would rank RY and TD as #1 and #2 on my list – VERY high on my list of forever companies to own given their extensive expansion plans. At the time of this post, I own all 6 big bank stocks above. I’ve owned BMO, CM, RY, and TD in that order, the longest: approaching 15 years each. I’ve only owned one stock for longer. Read on!
Our biggest Canadian railroads and industrials
Industrials, give or take, make up 10% of our TSX index. I would focus on these major stocks to build your portfolio around:
- Canadian Pacific Railway (CP) – paid dividends since 2001.
- Canadian National Railway (CNR) – paid dividends since 2005.
- Waste Connections (WCN) – paid dividends since 2010.
At the time of this post, I own all three companies above. I added more WCN to my portfolio earlier this year.
Our biggest Canadian utilities
Surprisingly, utilities have just ~ 5% share of our TSX index, and yet historically, the returns of our Canadian utility sector rival the broader returns of the TSX 60 (tracked by low-cost personal favourite ETF: XIU). What this means for you as a DIY stock investor is, I would consider bumping your Canadian utility sector allocation higher than just 5% in your portfolio for three reasons:
- Earn dependable, growing dividends from these companies below,
- Earn capital gains as well, and
- Utilities offer a nice, slight defensive stance for rising inflation. History says so at least!
I would consider building your dividend portfolio around these great established Canadian utility companies:
- Fortis (FTS) – paid dividends since 1972.
- Emera (EMA) – paid dividends since 1992.
- Brookfield Renewable Energy (BEPC) – paid dividends since 2003.
- Brookfield Infrastructure Partners (BIPC) – paid dividends since spin-off from 2008.
- Algonquin Power (AQN) – paid dividends since 2009.
- Capital Power (CPX) – paid dividends since 2009.
In fact, like John Heinzel recently wrote about, if I could own just one stock from this sector I too would pick Brookfield Infrastructure Partners. This company owns things we cannot live without: utilities, railways, pipelines, ports and communications towers.
I happen to have BIPC, BEPC and Fortis as my three largest utility holdings right now and I continue to buy more shares of each every quarter via automated synthetic dividend reinvestment plan (DRIP). I also own all other utility companies listed above.
Our big three Canadian telcos
Also on the low-side, our communications sector has <5% weighting in our TSX index, but I would consider pumping that a bit higher in your portfolio – to earn juicy, growing dividend income from these two prominent Canadian dividend growth companies:
- Bell Canada Enterprises (BCE) – paid dividends since 1880 (formal records date back to 1949).
- Telus (T) – paid dividends since 1999 (although various company structures, e.g., BC Tel go back to 1916).
Our biggest Canadian energy companies
Our country is resource rich, to say the least, including natural gas. Based on the last estimates I read, we have the world’s fourth-largest oil reserves and at current needs, enough natural gas to supply Canadians for the next 300 years. Such supplies will not only help Canada meet domestic energy needs but also those in other countries – as part of our export growth. For energy, I would focus on just these companies however to build your wealth-building dividend portfolio around:
- Enbridge (ENB) – paid dividends since 1953.
- TransCanada Corporation (TRP) – paid *dividends “since the late 1960s” as per their Investor Relations team. (*Cut dividend in December 1999 however)
You might know and be curious about Suncor (SU) – not in the list above. Full disclosure: SU remains a holding of mine (a legacy position not listed above) but I wouldn’t include it to build your portfolio around. Instead, I would focus on just these two pipeline companies to serve as “toll roads” for other energy companies per se, to start building your dividend income portfolio around.
You might be interested to know I eat my own cooking. Enbridge was the first individual dividend paying stock I purchased just under 15 years ago.
There are of course other sectors and great companies to consider, but given the bulk of our Canadian economy is historically fueled by the returns of financials, energy, industrials and utility companies – I would focus on those companies above in those sectors above, to build your dividend income portfolio aorund, first.
What about some U.S. stocks to buy and hold – forever?
Great question!
There are also quite a few dividend payers in the U.S., some that have an even longer, more established dividend history than those Canadian companies I listed above.
In fact, the S&P 500® Dividend Aristocrats® Index, constructed and maintained by S&P Dow Jones Indices LLC, targets companies that are currently members of the S&P 500®, have increased dividend payments each year for at least 25 years, and meet certain market capitalization and liquidity requirements.
The index contains a minimum of 40 stocks, which are equally weighted, and no single sector is allowed to comprise more than 30% of the index weight. The index is rebalanced each January, April, July and October, with an annual reconstitution during the January rebalance.
You can ride the returns of this index, without any individual stock selection, by owning one of my favourite low-cost U.S. dividend ETFs: NOBL.
You can find NOBL in this list of best ETFs to generate retirement income with.
While the subject of this post focused on Canadian dividend paying stalwarts, I would consider adding or owning the following list of stocks from NOBL along with others as individual holdings for some ever growing U.S. dividend income:
- Johnson & Johnson (JNJ)
Whether you are looking at consumer-focused products such as Band-Aid or Tylenol, its lucrative oncology drugs or its best-in-class digital medical devices for operating rooms, JNJ is a healthcare dividend income and dividend growth powerhouse.
Also, a reminder: Johnson & Johnson plans to spin off its consumer health unit in 2023. So, that will leave the parent company with its fastest-growing business (pharmaceuticals) along with its medical device segment. As such, JNJ could take off after that transaction closes.
- Procter & Gamble (PG)
- BlackRock (BLK)
Ya, I’m biased I know!
But look, even with a recent stock market slide, BLK remains a U.S. financial behemoth. This company is the world’s largest asset manager – getting bigger by the year – with some $10 trillion in assets under management. I would love to own more of this company in the coming years – since BLK has been effectively focusing on building shareholder value for many years now. On the dividend aspect, the company has increased its dividend payments to shareholders for 18 years, at an impressive 13% five-year and 12% 10-year CAGR, outpacing almost every other stock in the financial sector.
I haven’t bought any BLK yet this year although I would have loved to do so!!
- Walmart (WMT)
Thanks to its massive footprint (given I read some 90% of Americans live within 10 miles of a Walmart), I think WMT is a recession-proof company to buy and hold, maybe forever. Sure, Walmart has competition from other e-commerce competitors, such as Amazon’s massive online push, but the need to get to the store for groceries, supplies and anything else within minutes at a low-cost is hardly going away.
What specific Canadian or U.S. dividend stocks should you own?
I get this question, a lot.
I don’t think there is any magic bullet when it comes to investing, let alone predicting the future. *Some of these companies above will thrive and some might even lag at times – that’s to be expected.
*Some companies above might even freeze their dividend from time-to-time or gosh forbid, cut their dividend. Updated in late-2022 due to folks being very spooked about Algonquin Power stock moving forward.
As such, owning any one individual dividend paying stock won’t deliver investing success unto itself but owning a basket of Canadian and U.S. dividend growth stocks should tip the scales in your wealth-building favour.
As a guideline, for any individual stock no matter how good it seems today: I would follow my “5% rule”.
That is: don’t let any one company reach too much higher than 5% of your total portfolio value.
I answered that question and posted it with others on my FAQs page.
Top Canadian stocks to buy and hold – forever
I have highlighted these Canadian stocks because most of these pay an established dividend but more importantly, a growing dividend.
I also own many of these companies above because most have some built-in diversification, operating and owning assets beyond Canadian borders.
Although Buffett said his favourite holding period is “forever”, that’s a very long time. I would not be surprised however if most of these companies, together, deliver some amazing returns in the coming decades. As part of a forever investing plan, that’s plenty of time for me.
What stocks would you own instead of my top Canadian stocks to buy and hold – maybe forever?
Any U.S. stocks in particular that you have your eye on?
Further Reading:
Thanks for your readership.
Mark
Mark
My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I'm looking to start semi-retirement soon, sooner than most. Find out how, what I did, and what you can learn to tailor your own financial independence path. Join the newsletter read by thousands each day, always FREE.
AQN had an ugly week with more challenges ahead.
What are your thoughts on continuing to hold this stock?
Ugh, tough week for AQN eh Glenn?
I had a similar comment/reply to a reader above.
A few things working in AQN favour/things they can do longer-term:
1. Kentucky Power coming online – the deal should close in early 2023 which will bring in more revenue to AQN.
2. They need to pay down debt over time (which I suspect they will?)
3. They need to keep any future 2023 dividend increase, very modest or ideally, non-existent to keep more capital intact.
I’m going to continue to hold for the coming months and see how it plays out after the new acquisition comes online.
I keep a bunch of AQN in a taxable account for any tax loss against gains, so that’s a positive for me but there is also a small sum I own inside registered accounts as well.
Thoughts? You? If you sell AQN what would you buy?
Mark
I like your list. After reading it I always wonder why Candian Utilities (CU.TO) was never part of your utilities. One of the longest consecutive yearly dividend increases. When I read your article in Sept. there was already trouble with AQN.
AQN may rise from the ashes! As for CU, I could have added that but the 10-year returns for CU are essentially flat so although I considered it, I passed on it but you’re absolutely correct for steady income/yield in the range of 4-5% CU is a good one. I used to own it but I moved that money a few years ago into other utility stocks including my current mix of favourites: FTS, EMA, CPX, AQN, BEPC and NPI.
Do you own CU?
Invariably in any list, including with AQN, stocks will rise and fall. John Heinzl had a good balanced take I think Dave:
https://www.theglobeandmail.com/investing/education/article-algonquin-power-dividend-growth/
“A dividend cut would not be the end of the world for Algonquin. As much as it would disappoint some income-focused investors, reducing the payout is the most prudent course for the long-term health of the company. Paying investors close to 10 per cent makes no sense for a company struggling to fund its own business. Instead, Algonquin should focus on fixing two things: its stretched finances, and investors’ broken trust.”
I am an avid G&M reader. I do follow John and his portfolio. I went with AQN, ACO.x, CU, EMA, CPX, and H as my utility section of our portfolio. I debated between AQN and FTS and I chose the wrong one.10 yrs ago I had ALA versus AQN. When ALA was falling in 2016/17 I exchanged it for AQN. CU & ACO.X have a good payout ratio along with dividend growth over 5 yrs why I choose them. EMA was added more due to their dividend payout cycle of Feb, May, Aug Nov, it may sound stupid since you can’t just have RY in those months paying out. I only had one Brookfield equity and that was recommended by John. It was taken over by another Brookfield asset management. I find their pyramid is too convoluted and maybe like a house of cards, so I’m staying away.
I can see AQN cutting its dividend. This would be the best way to save money. The prospects of higher interest rates and not knowing how they are going to pay for the Kentucky deal are worrisome for many long-term investors. Are they issuing more shares at this price, using bonds, getting loans, or a combination? The expense is going up for this takeover. Sure they are looking at selling some assets. Unfortunately not good market timing to sell assets. Other companies will throw you an anchor rather than help you. AQN will be a candidate for tax loss selling. It will be a while before I add to my position if I ever do.
Same, I enjoy John’s articles from the G&M in particular. Rob Carrick has a sound, rounded personal finance column.
I also see a dividend cut coming from AQN but for the company health, overall, not a bad idea/decision. AQN makes up a very small portion of my portfolio. I own much more EMA, FTS, BEPC, CPX. I feel CU is a decent dividend income stock, not a great growth stock.
It will be interesting to follow AQN over time and see what investors/shareholders like or do not. Having Kentucky Power online in a few quarters will be key for them.
Mark
Hi Mark: A lot of great material to read. I am still not going to buy stocks in the Hundred -dollar range. I too enjoy reading John Heinzl’s articles. Have a great time at the game but I think my Ticats will beat your Red Blacks. I went to a game once and my nephew’s wife had on her red and black plaid shirt, and I had on my Ticats jersey. At the game Trevor Harris threw a pass to a receiver down the field on the opposite side. It was broken up and my brother jumped up and yelled pass interference. I said pass interference and he said yes. I said, come on let them play football and turned and my nephew’s wife was smiling. It was a late birthday gift for me. I have one nephew and one niece in Ottawa and one nephew in Kanata. As I live probably right in the middle of the two cities, southeast of Peterborough I am still a diehard Ticats fan. I hope you won’t hold that against me.
Our team was terrible this year…sigh.
I also enjoy reading John Heinzl’s articles, very sensible stuff IMO and I happen to own many of the stocks he does – not surprisingly given how few Canadian growth stocks exist; maybe only 40-50 worth owning long-term.
Mark
“Stocks to buy and hold forever” is one of those overused click-bait taglines that I just love to hate. Normally I will just ignore the article completely. I have two problems with the phrase:
( 1 ) history has shown that VERY FEW companies last forever. The investment graveyard is filled with companies who were subjects of this very tagline in years past. Good companies fail all the time, for a variety of reasons. If you are going to buy stocks, you have to pay attention to them AND be prepared to sell them.
( 2 ) the phrase seems to be most uttered by people who are awash in cash and don’t need to sell stocks to pay their bills. I’m not interested in investment advice from mega-rich knobs who hold winning stocks so they can brag about them to whomever will listen.
That rant came out stronger than expected. Clearly a very activating headline for me. I wasn’t trying to be cantankerous old bugger.
Buy good companies for a reasonable price. Sell them when they get too expensive.
I looked up that NOBL ETF. It yields 2.16%. How is it possible that the 40 companies that spent the last 25 years increasing their dividends can collectively only offer a 2.16% yield? It’s because they are too expensive, or not nearly as good as people believe. Either way, that’s a hard pass for me.
The author pretty well suggests what others have suggested for decades.
If you seek income from your investments, hold companies that have a long history of paying dividends. Why? Because it’s safer than investing in companies that literally started paying dividends in the past couple of years.
If you have a suggestion other than banks that have been paying dividends since the late 1800’s, then I’d love to hear it.
Keep in mind, it’s also an article for the sake of writing an article and attempting to generate revenue via ads.
It’s nothing new and basically everyone and their dog is pumping out articles, as a potential additional income stream.
Hi Samwise,
I don’t deny I wanted a catchy title but I’m hardly the first nor the last to try and have some catchy titles from time to time. Mainstream media does this far more than I do.
As for generating clicks, I write articles I’m passionate about. A monthly “dividend income update” is hardly ad-seeking since there are millions of those.
Take care,
Mark
Very fair, Neil – you are welcome to rant – a bit!
Recall ETF issuers are required to pay their shareholders the dividends they collect from securities held in their funds….but, how they choose to distribute the funds is up to the individual issuer. Meaning, dividends may be paid to investors in the form of a cash distribution or a reinvestment in additional shares of the ETF, or other factors. So, it’s not a 1:1 relationship. You would need to read the fund prospectus for NOBL and/or ask the money manager directly to learn how the manage the distributions in detail.
In terms of #1, you are correct, all companies are subject to change.
In terms #2, I’m hardly mega-rich and I just share what has worked for me.
Take care,
Mark
what about CNQ it has performed really well and CPP portfolio love them.
I own a bunch of CNQ. 🙂
Mark
Amazing article and amazing list of stocks to hold for the long term,
I hold most of them excpet for brookfield I’m holding the renwable one BEP.UN I honestly get confused from all the tickers that falls under Brookfield but it’s an incredible company for sure also the three big insurance companies MFC SLF GWO and also POW and couple of reits but my biggest holding is CNR and yes I know you’ve said we should stick to a 5% allocation but I have so much conviction in this company because I see their locomotives passing by 24/7 by my work place and I see the massive loads these trains move and there’s no other way arround it we simply need them !
By the way when I was checking some of the tabs in my TD webroker I’ve noticed the podcasts section and saw yours 🙂 I’ve watched it and enjoyed it full of good informations.
Thanks again Mark for all the effort.
Nice to hear from you, as always!
I hold MFC, POW and GWO as well, Gus – just in lower quantities…
I’m a big fan of CNR. I could see larger dividend increases in the coming years from them vs. banks. In the range of 10% or so from CNR and CP as well. Just a guess of course.
My 5% rule is just for me 🙂 I mean, I know investors that keep 10% or so in Apple or Microsoft, etc. but that’s not for me. Seems too much in one stock in just one sector. I have a few stocks approaching 5% right now but that doesn’t mean I won’t let a few winners run. Instead, just tend to be more mindful when any one stock approaches 5% of total portfolio value. The same excitment into any one stock that can make you wealthy, could also make you poor!
Thoughts?
Mark
Makes perfect sense Mark, I should’ve added that on top of believing in CNR and since the yield is so low and it requires a decent amount in order to drip one share I ended up with a higher % I totally agree with you that we shouldn’t fall in love with the company 🙂 because you never know but I still feel confident about CN 🙂 another low yield company that I hold and drip is MRU and I’m happy with it because just like CNR grocery stores are so resilient even in a competitive groecry sector.
Just read now that Emera announced an increase in their dividend , one reason why I love this dividend growth strategy , markets goes south income goes up 🙂 I hold EMA FTS AQN CPX and BEP.
I won’t add to CNR but I’ll keep dripping but I’ve got ATD and BIPC on my list to buy .
Thank you Mark for your insight and word of wisdom.
Well, you’re doing all the work by holding good companies! CNR is great. MRU is a good one too for higher food inflation. Happening realtime!
Yes, I happen to own a few hundred shares of EMA for the boring dividend and some capital gains along the way.
I hold EMA, FTS, AQN, CPX, BEPC and BIPC for my main utilties. Some Southern (SO:US) in the U.S. as well.
Fortis should announce their next dividend raise in a few months 🙂
Happy Investing and Buying!
Mark
Mark I guess our raise from Fortis came sooner 🙂 they just increased their dividends by 6% hooray !
YAY!!
Mark
I cover my bank allocation with HCAL. Something to consider for some as well.
However i tend to only invest for Income, so it suits my personal style of investing while concurrently being a top performing bank ETF.
HCAL is that higher-yielding fund, right Paul? Is that tax-efficient as well re: dividend tax credit. I would need to dig in to confirm 🙂
Cheers,
Mark
nice one
Some nice new names in the ETF and XIU or XIC are not where to be seen in this screen in the top 10 / 12 names didn’t know Manulife has CDIV / Dividend etf 14% returns.
check this screener out : https://money.tmx.com/en/etf-screener
Thanks for sharing. Anything on your buy list? 🙂
Mark
Hi Mark, Always very interesting posts. Inre: owning US stocks and CRA T1135 Are you aware that the US has very high estate taxes on foreigners owning more than $60,000 of US property? So, if you die, you might be leaving far more money to the US than to your spouse (and there is no Canadian tax credit on this). That is the reason for T1135. As well I suspect that US stocks in a RRIF would receive the same tax treatment. Unfortunately, US taxation is so convoluted, and ever changing, that it is difficult to understand. With your contacts, could you find an accountant who could give us the basic rules because otherwise I fear many persons are going to face nasty financial surprises.
Ah, great questions and comments. Not advice, not tax advice at all, but here is an older post that remains quite relevant!
https://www.myownadvisor.ca/note-to-cra-foreign-income-reporting-doesnt-need-to-be-a-foreign-concept/
So, I am aware that the U.S. has high estate taxes but you can be tax-smart by owning U.S. stocks or ETFs in specific accounts to avoid that 🙂
Thoughts?
Mark
How does someone in their 40’s start dividend investing, we do have some MF’s under the spouse’s DC plan and some all-in-one ETFs in resp/RRSP and TFSA? We do have some lumpsum investments to do, I am completely lost on how to get started or what to buy first. Should it be a few of each or do 5% of one stock at a time, then move onto next etc.
Great question, Anu. Happy to write an updated or new post on that subject.
https://www.myownadvisor.ca/how-i-built-my-dividend-portfolio/
Let me know what other specific questions you have regarding this post above.
I would persronally start your transition small…slowly buying dividend growth stocks over time. Have a plan, get your process nailed down, go from there.
Mark
Thank you for your response, I have read the article and will read it again.
It’s just super overwhelming to get started. If I still have questions, i will reach out. If I did, I would love to add my rough nos etc, is there a way to send those just to you instead of publishing on the forum..
Most welcome.
I can’t offer direct advice, for many reasons, but I can consider answering any questions from a personal perspective!
You can add to comments or share in my inbox via Bio & Contact page in the top right of the site.
My best,
Mark
Prefer DGRO or SCHD vs NOBL. Much lower fees.
Thanks, Dave. I recall DGRO is popular with John Heinzl and his dividend income portfolio model as well.
https://www.theglobeandmail.com/investing/investment-ideas/article-john-heinzls-model-dividend-growth-portfolio-as-of-may-31-2022/
Do you follow along with his model portfolio at all?
Mark
Hi Mark. Yes, I take a peek at it occasionally. It’s a useful benchmark
I used to own NOBL, but have switched to SCHD mostly. Cheers!
Yes, NOBL is a very good benchmark and option to skim U.S. dividend aristocrats to buy and hold. I’ve always used those/similar ETFs for my index skimming work. 🙂
Mark
Great article as usual, Mark. I noticed you don’t have exposure to individual energy stocks. I am sure you have good reasons to avoid them. However, the energy sector has been one of the top performers for the past couple of years. I believe it will keep trending north given the tight supply issue and other geopolitical factors. There are a few outstanding individual oil & gas stocks that I believe can deliver good returns. They are Cenovus, Canadian Natural Resources, Vermillion Energy and Freehold Royalty, acompany offering excellent monthly dividends.
Take care Mark and wish you all the best.
Well, I do have a few – CNQ and SU in fact Ken, but you know, I find energy very cyclical. Like tech. If oil is priced low, people are running from energy. If oil is priced high, people are flooding to it. I like my energy pipelines ENB and TRP, and then industrials like CNR and CP, since you cannot get the oil or gas anywhere without these logistics. That said, I do some producers. I think CNQ is one of the best run companies in fact and I own a few hundred shares. But, given their cyclical nature, I’m not sure I’d build a dividend income portfolio around CNQ. SU has to clean up their health and safety issues!
What do you like right now? Vermillion or what about WCP? CVE has had a huge run in the last 5-years.
Mark
WCP is also an excellent stock with huge growth ahead. Tourmaline Oil (TOU) is an excellent play in gas that offers special dividend. One thing for sure, no one knows what the future holds!!!! Just hope, we won’t get a recession, will settle for a soft landing, ha..ha..
Ya, maybe I will get some WCP. TOU has been on fire since 2020. Just wow. Quite the growth story.
Yes, with so many people in big debt, hard not to see some sort of a recession coming. Just a hunch.
Great ideas. I understand you cannot list all companies, but I wonder why some insurance companies, like Manulife, is not part of this list. Manulife is well managed, solid, diversified, has nice growth prospects (especially in asia), has a very nice dividend growth track record and is currently damn cheap by many standards right now. Also, insurance business and asset management business should follow inflation levels and not suffer too much from it, unlike capital intensive companies like railways (which, by the way, use amortization rates that are probably too low at their current level to reflect true replacement value of assets). Insurance companies could also suffer less than banks in the future in a world where the indebtness is at sky high levels like now (hard to grow your business when you sell debt and everybody is already overwhelmed with it).
Thanks for your blog!
Great questions and comments, JF.
When I look at MFC (I own it as well!), I don’t see the same stability. They have cut their dividend a few times (the right move for them) and I too, am still waiting for this stock to “pop”!
I think MFC is a nice “add on”, potentially, but I wouldn’t start nor build a portfolio around this stock per se. I’d start with my list.
Assuming most Canadians do not succumb to higher debt issues (i.e., defaults, some are quite possible), I could see financials in general coming out very, very well, including life insurance companies, with higher interest rates. Higher rates are a good thing IMO!
Thoughts?
Mark
I think financials will do great in general as well. I’m a big fan of Ben Graham (and also Buffet prior to closing his partership around 1965), so price is a huge part of the equation for me. I look a lot at book value and 10 yr pe ratio. I know it’s outdated 🙂 and I am used to hear some laugh, but it has served me very well in the past 20 years. When I look at Canadian financials, they are excellent, but I find them more expensive, so total return over time is reduced accordingly. MFC and POW both are selling below book value and have 10 yr pe ratios below 12, compared to 12 to 16 for banks (except Laurentian Bank, which has these metrics similar to MFC but with way less attractive ROE and growth). Also past growth (calculated Ben Graham way, avg of 3 years 10 yrs ago compared to last 3 yrs) runs between 23% and 86% for banks, compared to 112% for MFC (except Laurentian bank with minus 46%, that probably partly explains the price).
POW and MFC are cheap, but they have higher yields and that’s always been a bit of a flag for me. PEs of both are very attractive. I own both and DRIPping both every month. Not intending to add more at this time other than via DRIPs.
Do you own any EQB? Likely a longer-term bank growth story and a play for growth vs. capital gains.
Mark
No I don’t own EQB. But this opens a topic I could spend hours on. I’m all with questions in my head right now about that. Apart from the fact that challenger banks and traditional banks face the same problem of high overall debts so less room for growth, challenger banks are a business model I am still trying to understand. I am wondering if their business model will affect traditional banks the same way Amazon affected businesses like Walmart and other retailers. ROE and growth are very interesting for EQB as well as its current price. I am still swimming through details though like trying to understand exactly why they cap the deposit account to 200000$. Really an interesting subject.
LOL. Well, write away. I enjoy reader comments and questions!
EQB is a very small position for me, and simply a potential growth story in the coming decades. Nothing more. They pay a very small dividend. We’ll see if that works out in time! I do feel they are onto something and stand to benefit from offering juicy GIC rates for many Canadians.
Thoughts?
Great read Mark. Thanks for your insights and for sharing your investment principles.
I, fortunately, own many of those stocks you have listed. Some more prominent positions than others of course. They really are my ‘get and forget’ stocks and let them do their thing as we say. Not been disappointed yet with the performance, especially during these somewhat uncertain and volatile times. I might add a few others if I may….Power Corp (POW), Alimentation Couche Tard (ATD), and the stalwart of my portfolio Microsoft. No plans to ever sell but as you have noted forever is a long time. Maybe let my kids decide that when I’m gone but for now I will let it ride.
Nice, Greg!
I like ATD, but POW dividend history is a bit suspect. I own both for the record.
MSFT will be interesting over time. I mean, can tech grow that much in the future? I have no doubt dividends will be sustained by them but I’m not sure we’ll see that trajectory of growth again like we did for the last 10-11 years. I could be totally wrong of course and happy to own it via QQQ here 🙂
Thoughts?
Mark
I totally agree- when I’ve tried to be clever and trade a bit more, it goes wrong- either I lose $$ or I sell too early. I’m trying to just buy more of what I already have and DRIP more shares. I’ve owned several stocks since 2007 or so, like Diageo and Sysco. Sysco’s dividend was $.88 a year back then, almost $2 now- pretty good for an already large company, and my yield on cost is over 9% now. Buy and hold is boring as heck, but it works!
Great stuff, Geoff. I’m terrible at timing. I simply tend to buy more of these companies when I can – meaning – when I have the money to do so. I try not to worry about missing too many 52-week lows, etc. I figure the sooner and longer I have my money working for me, the better. So far, so good.
Anything you would add or remove from my list? Both of those stocks are very good holdings. Diageo has been a long-term star for sure. Well done. I hope you own 1,000+ shares. Ha. 🙂
Mark
Unfortunately I only have maybe 25 Diageo shares, I also like Brown-Forman, I beleive they’re a Dividend Aristocrat. Distillers have great economics and brand lotalty.BIP and BEP are great, very diversified and I always buy more when the stock dips. MSFT would be a good addition as well.
I dont mind having over 5% in any 1 stock if I think it’s well managed and growing. I really noticed my dividends took off when I bulked up existing positions to DRIP shares instead of having more smaller positions
Yes, I also think BIP and BEP are great.
I would like to own MSFT but if I have to choose between that and those other starter, U.S. stocks, I will go with my four: JNJ, PG, BLK and WMT.
Ya, I don’t mind a few holdings going over 5% but I struggle with having too much in one stock. That can lead to too many biases and poor behaviour I think!
Kudos for owning 25 Diageo and other well-established stocks – sounds like you’re well on your way to build wealth via some dividend growth stocks if not there already. 🙂
Mark