If I look at almost all the portfolios of Canadian friends & family, the dividend earners are heavily weighted towards banks. One is dependent upon the continued success of the Big 5/6 Chartered Banks. The below may not be relevant because you have diversified away from the banking sector.Unfortunately, the website wants me to sign in so no, I didn't read the rest of the article.
We don't live off the dividends in retirement, but we're lucky in that we can re-invest our dividends in both our individual equity all-Canadian taxable portfolio allocated to seven sectors and our tax free accounts that contain a global dividend indexed ETF.
We both also have tax deferred accounts containing a global balanced index ETF but have to take a Canadian government minimum mandated withdrawal so no re-investment of distributions in that account.
With re-investments from dividends and adding whatever we can save from pensions our Canadian taxable dividend portfolio is larger than our other portfolios combined.
Over the long term dividend investing has done very well for us here in Canada. Our income from the taxable account alone has increased by 10% this past year, easily outperforming Canadian inflation and that was always the initial objective when this our second taxable dividend portfolio first got started in 2003. Plus in our province up to just a touch over $100,000 of total income per person, tax-wise, Canadian dividends are very friendly.
They are heavily geared - although not in entirely obvious ways - to the Canadian housing market and the resulting consumer boom. One can't assume the past will be repeated. Having lived through the financial crash here (UK) and seen financial institutions just stop paying dividends for years.
If one is going to have a Canadian dividend income portfolio then:
- one needs to use various strategies to diversify away from financials
- I recommend holding at least a US dividend portfolio as a way of getting access to sectors that the Canadian index is light in: consumer staples, healthcare and technology. Companies that have a long history of paying or increasing their dividends ("dividend achievers")
The correct answer is, of course, to focus on Total Return. Which may be more tax efficient in any case. And the risks of the sectoral concentration of the Canadian index remain. Financial Services and Natural Resources (primarily oil & gas).
Statistics: Posted by Valuethinker — Tue Jan 09, 2024 4:58 am — Replies 9 — Views 1527