Have I got this right? Dividend related, opinion needed!

May 2nd, 2020 7:21 pm

#1

Woodbridge905 [OP]: Deal Addict; Sep 5, 2010; 2347 posts; 379 upvotes; Toronto

May 2nd, 2020 7:21 pm

Have I got this right? Dividend related, opinion needed!

Have I got this right?

I bought 100 stocks of 3 different big cap Canadian companies (telecom, banking and utilities) each of which pays very good and stable dividend of close to 5.25% (based on the price I purchased them at in late March when the market had hit peak bottom)

I am in this for the long term, mainly for some steady dividend income.

Assuming no dividend slashing in the short term, I will be making close to $800 in annual dividend income from these 3 stocks. Not much, but it is a start and better than what I would get from putting my money in a saving account.

So my question really is, and assuming these companies don’t disappear overnight or slash their dividend significantly , should I just enjoy the quarterly dividend returns and not worry if these stock prices go down in the future? In other words, treat this like a dividend cash cow for years to come. If I get lucky and they double in price when things get back to normal in a few years, I could sell and make money. If not , I continue to enjoy the dividend returns. Win-Win.

For the record , I am up an average of 15% for the three stocks since I bought them back on March 23, although I was as high as 20% at one point and know could easily lose all my gains.

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May 2nd, 2020 7:33 pm

#2

craftsman: Deal Expert; Jan 27, 2006; 21618 posts; 15241 upvotes; Vancouver, BC

May 2nd, 2020 7:33 pm

Depends on your mindset really.

The standard dividend growth investor looks at the rate of dividend growth first, dividend second, and share price third as measures of value. The standard investor will typically look at share price 1st and dividend second... won't care too much about dividend growth.

From the sounds of your post, you are looking to be in the first camp - dividend growth investor. If so, you just need to understand that the stock price will move and if you are OKAY with that, then yes you are right - cash flow machine.

+3

May 3rd, 2020 7:05 am

#3

Stryker: Deal Addict; Jul 23, 2007; 4983 posts; 4554 upvotes

May 3rd, 2020 7:05 am

Basically what I do, except I'm not looking to sell for a profit. This calendar year, selling is about the last thing that's on my mind, even after dividend suspensions, and a cut. Every time we can save a few $thousand from our income, I either occasionally buy a new Canadian company or mostly add to what I already own in the taxable portfolio.

+2

May 3rd, 2020 8:30 am

#4

FrancoisS38856: Newbie; Apr 9, 2018; 26 posts; 13 upvotes

May 3rd, 2020 8:30 am

First, congratulation for your excellent timing. Yes I would hold for the long term, add more especially if we retest the lows. And if they double in price you could rebalance, that is just sell half position. May I ask which companies you picked? Of the three sectors my picks would be Telus, TD bank and Fortis.

+1

May 3rd, 2020 10:34 am

#5

Marzipan: Deal Addict; Nov 28, 2007; 3185 posts; 1081 upvotes; Whitehorse, YT

May 3rd, 2020 10:34 am

OP is in it for the long term so there should be no talk of selling and OP should not be watching this daily ...ha! ha!. OP is perfectly on the right track. Total return is what matters i.e. dividends plus or minus gain or loss. Don't forget we get a nice dividend tax credit. And one last thing, don't participate in a DRIP. It makes book keeping very complicated in the long term.

May 3rd, 2020 8:01 pm

#6

Woodbridge905 [OP]: Deal Addict; Sep 5, 2010; 2347 posts; 379 upvotes; Toronto

May 3rd, 2020 8:01 pm

FrancoisS38856 wrote: ↑ First, congratulation for your excellent timing. Yes I would hold for the long term, add more especially if we retest the lows. And if they double in price you could rebalance, that is just sell half position. May I ask which companies you picked? Of the three sectors my picks would be Telus, TD bank and Fortis.

Thank you,

Bought the following on March 23: i copied an pasted this from my notes which includes the dividend payout.

100 x BNS at $49 (.90, $90 a QTR
105 x BCE at $47 (.83 , $87 a QTR)
90 x Hydro at $22.50 (.24 , $22 a QTR)

My Signature is empty. My signature space is not for sale. You may not contact me to advertise your RFD-related activities here. I repeat, this signature-space is not for sale, unless it is a ......day

May 4th, 2020 6:24 am

#7

CheapScotch: Deal Fanatic; Sep 1, 2013; 6198 posts; 762 upvotes

May 4th, 2020 6:24 am

It's a reasonable strategy, provided you have very high confidence that this truly is a long term investment, and you will not need to rely on the dividends nor sell the stocks to pay your current living expenses (in case, for example, you lost your job).

May 4th, 2020 9:22 am

#8

cloak: Deal Addict; Sep 2, 2009; 2874 posts; 2898 upvotes; Ottawa

May 4th, 2020 9:22 am

Woodbridge905 wrote: ↑ I bought 100 stocks

Just a minor thing: shares.

On topic: One advantage is that I find that with the majority of my dividend holdings for the longterm, the dividends help me sleep at night and ignore the noise (not panic sell).

+2

May 4th, 2020 5:54 pm

#9

CheapScotch: Deal Fanatic; Sep 1, 2013; 6198 posts; 762 upvotes

May 4th, 2020 5:54 pm

cloak wrote: ↑ Just a minor thing: shares.

On topic: One advantage is that I find that with the majority of my dividend holdings for the longterm, the dividends help me sleep at night and ignore the noise (not panic sell).

Again, it is a reasonable strategy, particularly if the dividends provide you with a measure of psychological comfort, but .......

May 4th, 2020 8:06 pm

#10

jaysdt: Newbie; Sep 6, 2018; 93 posts; 61 upvotes

May 4th, 2020 8:06 pm

CheapScotch wrote: ↑ Again, it is a reasonable strategy, particularly if the dividends provide you with a measure of psychological comfort, but .......

good luck trying to convince people here not to chase dividend stocks lol

May 5th, 2020 5:59 am

#11

CheapScotch: Deal Fanatic; Sep 1, 2013; 6198 posts; 762 upvotes

May 5th, 2020 5:59 am

jaysdt wrote: ↑ good luck trying to convince people here not to chase dividend stocks lol

I think that, as the Covid-19 pandemic continues to affect the economy and more companies cut their divided payout, some people here will change their mind about these stocks.

May 5th, 2020 6:29 am

#12

FrancoisS38856: Newbie; Apr 9, 2018; 26 posts; 13 upvotes

May 5th, 2020 6:29 am

Chasing yield is as stupid as trying to time the market too much. Chase the growth of the dividend instead, look for total return. Look for things that are not affected by price, that is, free cash flow growth, low debt, etc. Ignore price and yield and focus on income statements and balance sheets. But don't ignore dividend either, it's been proven that dividends account for two third of long term return when reinvested.