Weekend Reading – More dividend increases edition

Weekend Reading – More dividend increases edition

Hey Everyone!

Welcome to a new Weekend Reading edition: my more dividend increases edition.

First up, a few recent articles in case you missed them!

All signs are pointing to a recession. So, how are you going to navigate that?

A reminder Oops, they did it again….our Bank of Canada increased interest rates and I provided a chronology of all recent rate increases here. 

Weekend Reading – More dividend increases edition

Ah yes, my love of dividends. Let me count thy ways!

First up, I wanted to highlight my latest monthly dividend income update below:

October 2022 Dividend Income Update

I would like to think thanks to my diversified basket of dividend paying stocks, even with the market going lower and sideways, my income is going higher and higher with these recent dividend raises:

CNQ (Canadian Natural Resources)

The Calgary, Alberta-based company raised its quarterly dividend to 85 Canadian cents, as energy companies focus on returning the excess profit to shareholders. With this, the company has raised its quarterly dividend twice so far this year for a total combined increase of 45% to C$3.40 per share annually.

SLF (Sun Life Financial)

This company announced this week that a dividend of $0.72 per share on the common shares of the Company has been declared, payable December 30, 2022 to shareholders of record at the close of business on November 23, 2022. This represents a 3 cent increase to the amount paid in the previous quarter.

WCN (Waste Connections)

And, finally just for this week (!), the regular quarterly cash dividend for WCN increases to $0.255 U.S. per common share from $0.23 U.S. per common share, paid on December 1, 2022 to shareholders of record on the close of business on November 16, 2022. That’s almost an 11% increase. 

Telus (T)

From their release this week:

“Importantly, our significant, ongoing broadband network investments further enable the continued advancement of our financial and operational performance, strengthening our confidence in the robust outlook for our business, and the long-term sustainability of our industry-leading dividend growth program. The 7.2 per cent year-over-year dividend increase announced today represents the twenty-third increase since we initiated our multi-year dividend growth program in 2011, with our program now in its twelfth year and recently extended through 2025. Since 2004, TELUS has returned more than $22 billion to shareholders, including over $17 billion in dividends and more than $5 billion in share purchases, representing approximately $16 per share.”

Why dividends???

After all this goodness, why not dividends???

Well, there is definitely something beautiful about seeing money earned from your investments come into your account, and then seeing that money buy more investments, every month, every quarter and every year. 

Yet participating in dividend reinvestment plans for your investments isn’t the only great thing to get psyched-up about.

Raises like the ones above can help you keep some essential emotional investing discipline as well…

One of the best financial books I’ve read, The Investor’s Manifesto by William Bernstein, talked about the attributes of a successful investor:

  1. They must possess an interest in the process,
  2. They need more than a bit of math horsepower, far beyond simple arithmetic ,
  3. They need a firm grasp of financial history, and
  4. They need “the emotional discipline to execute their planned strategy faithfully, come hell, high water, or the apparent end of capitalism as we know it.

With that inspiration, here are a few reasons to consider dividend-paying stocks as part of your own investment strategy.

1. Dividends are less volatile than stock prices

Remember the financial crisis of 2008-09, when stocks plunged about 50 per cent from peak to trough?

Well, it could happen again.

But in most cases, companies kept paying dividends. Look at this year. Look above!

This highlights one of the main attractions of dividends: They’re a lot more stable than stock prices and therefore you can avoid market noise and day-to-day price fluctuations.

2. Dividends protect you from inflation

I like my “TULF” stocks – telecommunications, utilities, low-yielding stocks but higher growth stocks, and financials – because they tend to raise their dividends regularly. These income increases help protect me from the wealth-destroying effects of inflation.

3. Dividends get a tax break

Unlike interest income, which is taxed at one’s full marginal rate, dividends from publicly traded Canadian companies benefit from the dividend tax credit, which dramatically lowers the tax hit for investors.

Dividend Tax Credit 101

4. Dividends help to preserve your capital

I know many aspiring retirees and retirees from the work I do at Cashflows & Portfolios.

Many people are simply reluctant to deplete their capital in retirement.

I get that.

I hope to “live off dividends” a bit myself!

The beauty of dividends from established dividend paying stocks is they are a gift that keeps giving: you can consider spending your dividend income every year knowing that you won’t have to touch the capital. Of course, selling off stocks is always an option for more income too!

5. Dividends deliver fantastic returns!

Studies have shown time and again, stocks with growing dividends post fantastic returns over the long run. See below!

The power of dividends

Source: RBC

Final thoughts…

I love dividends. I love dividend income.

But dividends from dividend stocks are not guaranteed. Companies can and do occasionally cut their dividends. Stock prices are never guaranteed to go up in the short-term. Stock prices can fall, drastically at times.

But then again, dividends play a key role in long-term returns and can be used to provide very meaningful income. Dividend-paying companies represent a significant portion of our Canadian stock market and for that reason, it makes great sense to consider owning them in your portfolio.

Have a great weekend counting your dividends too!

Mark

More Weekend Reading…

Unsure about any individual dividend stocks to own for income? No problem.

Dale Roberts wrote about owning some key ETFs for that:

“There are a few reasons to play defense. A retiree or near retiree can benefit from less volatility and a lesser drawdown in a bear market. If your portfolio goes down less than market, and there is a greater underlying yield, that lessens the sequence of returns risk. You have the need to sell fewer shares to create income. For those in the accumulation stage it may be easier to stay the course and manage your portfolio if it is less volatile. You can build your portfolio around defensive Canadian ETFs.”

Link: Building the big dividend retirement portfolio with defensive Canadian ETFs. 

On Cashflows & Portfolios we covered a few personal finance biases to be mindful of.

Loved the read from my friend GenY Money about her recent Maldives trip. On my list of destinations to hit!

Struggling to figure out what’s going on with all these Fed and central bank hikes? Consider this simple liquidity cycle:

Liquidity Cycle

Source: https://twitter.com/BennettWoodman/status/1586723711616516096/photo/1

Have a great weekend!

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.

20 Responses to "Weekend Reading – More dividend increases edition"

    1. I’m not happy 🙂

      That said, I think there are 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.

      At the end of the day, total returns matter but I am worried a bit about a dividend cut in the coming 12-months. I will continue to hold here myself since I’ve owned AQN for years.
      https://www.myownadvisor.ca/5-stocks-i-want-to-buy-in-2022/

      I’m going to continue to hold for the coming months and see how it plays out.

      You?
      Mark

      Reply
      1. Thanks for your insight, Mark and for providing this forum.
        As for me, I’m buying, selling and holding 🙂
        Bought some on Friday in my RRSP account to average down. Will continue to hold to see how it plays out. Even if they cut the dividend in half, still might work out ok in the long term.
        I also sold some at a loss on Friday in my Non-Registered account to offset some capital gains from selling some of my energy positions in ….Suncor, Cenovous and CNQ. Had bought them in March 2020 and sold at 2-1/2 times.
        Will sleep better sitting on the cash and will wait for an opportunity to deply.

        Cheers
        Tom

        Reply
        1. I hear ya. I will continue to hold and honestly, I think a dividend cut of 50% or even 25% would be good long-term. I’m more concerned about the longevity of any company I own vs. near-term quick fixes.

          Very, very worse case I suspect AQN gets bought out by a bigger player in the coming years at a higher price.

          I also hold SU and CNQ for energy and have done so for about a decade. I think oil (SU and CNQ) stocks are going higher in 2023. Just a hunch.

          My biggest question is what to buy in the TFSAs in 6-weeks! Saving for that now.

          Mark

          Reply
  1. When I can find it for free, once in a while I get something useful from Jason Zweig of The Wall Street Journal. Some item that can also apply to Canadian investors.

    At the end of October he wrote an article with the title “What to Do When You Know What Stocks Will Do Next”.

    “Sometimes, investors think they know exactly what’s coming around the corner. That sort of certainty is often dangerous.”

    Look it up. There’s a free copy over at Foxbusiness

    Reply
    1. Nice stuff. Jason is a good writer. I think anyone that knows what the future holds, in exact terms, is largely full of themselves and other stuff 🙂

      Mark

      Reply
  2. Hi Mark,

    Thanks for the mention. While we may face some challenging times ahead, still there are companies that will continue to thrive in this environment. We are a proud partners of those companies you’ve mentioned that announced dividend hikes with the exception of SLF!

    Reply
  3. Thank you Mark for this great article, those drips are my “sleeping well” pills at night 🙂 they always keep me calm to the point that I don’t bother with the red and green days as long as our income is growing and that’s what matters to me.

    Reply
  4. Who am I to argue with a former brain surgeon in William Bernstein but I totally disagree with his point 2.

    “They need more than a bit of math horsepower, far beyond simple arithmetic”

    I’ve never been to university and I’m arithmetically challenged but I can still run a portfolio like I’ve done for the last forty years.

    When I heard yesterday that Telus had only increased their dividend by 3.7%, my first reaction was oh, oh.

    Sometimes it helps to sleep on a potential problem overnight and when I woke up, one of the first things I realized was that Telus for the last while has been in the habit of increasing their dividends twice a year. That was a relief.

    If Telus did well with their dividend increase, another company in the communications sector, Cogeco Inc. (CGO) did even better with a recent announcement of a dividend raise of 17%. I own it too, but this is another one the market doesn’t like. Down 28% + in our own portfolio. That’s fine. We just get more income when I can buy more shares.

    Reply
    1. First time I heard someone talk about CGO , they have a great record of increasing dividend but the fun part is the fact that 48% is owned by Rogers the company that haven’t raised its dividend in years .

      Reply

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