Investing

Investing Idea - Dividend Growth

  • Last Updated:
  • Oct 16th, 2020 5:52 pm
Deal Guru
Jan 27, 2006
14547 posts
7444 upvotes
Vancouver, BC
llpresident wrote: Dividend growth stock, Barrick Gold, with the beat and raise:

https://financialpost.com/commodities/m ... ices-surge
ABX doesn't have a good history of dividend growth.... sure they are increasing it now but for the past couple decades they have basically flat lined as far as a stock price goes. And with a dividend of 1%, there isn't much to write home about now.
Deal Addict
Dec 3, 2014
1907 posts
1087 upvotes
Ontario
craftsman wrote: ABX doesn't have a good history of dividend growth.... sure they are increasing it now but for the past couple decades they have basically flat lined as far as a stock price goes. And with a dividend of 1%, there isn't much to write home about now.
ABX is a good diversifier - it can perform well even if the economy is in the shitter. The yield still remains very modest but should continue to grow. What it lacks in dividend it has more than made up for in capital gain. A solid holding in my books.
Deal Addict
Nov 9, 2013
3909 posts
3595 upvotes
Edmonton, AB
llpresident wrote: ABX is a good diversifier - it can perform well even if the economy is in the shitter. The yield still remains very modest but should continue to grow. What it lacks in dividend it has more than made up for in capital gain. A solid holding in my books.
For whatever reason I Lol'd hard at the economy in the shitter comment. Thanks for that.

That's it. That's the post.
Keep calm and go long
Deal Guru
Jan 27, 2006
14547 posts
7444 upvotes
Vancouver, BC
llpresident wrote: ABX is a good diversifier - it can perform well even if the economy is in the shitter. The yield still remains very modest but should continue to grow. What it lacks in dividend it has more than made up for in capital gain. A solid holding in my books.
It is a good diversifier but I question the ability for ABX to have good capital gains in the long term. In the last 25 years, ABX has gone up a total of less than $10 per share ($30.75 back in January of 1995 to $38.74 today).
Member
Jan 30, 2017
475 posts
66 upvotes
reversi wrote: Hi Rod,
Could I get your thoughts on CPX? I’m wondering if it meets your criteria for your DGI portfolio. Thanks
Would love to see this too
Sr. Member
Oct 31, 2009
564 posts
100 upvotes
Hi Rod,

I have started positions with EPD (NYSE) in my non registered account. How does and how much does distribution being taxed on these companies? Is it worth investing on these companies on your non-registered account? Thanks.
Deal Addict
Feb 26, 2017
1628 posts
1664 upvotes
desertfox wrote: Hi Rod,

I have started positions with EPD (NYSE) in my non registered account. How does and how much does distribution being taxed on these companies? Is it worth investing on these companies on your non-registered account? Thanks.
The withholding tax on dividends is nearly 40% and applies to all accounts. Its what kept me away from US MLPs, which in the end probably saved me from myself...

If your still interested in Pipelines I think your much better off owning a Canadian one or one of the US C Corps. There are a handful of well run ones where despite the headwinds the dividend looks safe.

Here is a G&M article.

https://www.theglobeandmail.com/globe-i ... 20citizens.
But for Canadian investors, the tax treatment is quite different. Canadian investors in an MLP with U.S. assets are generally considered to be engaged in a business in the United States. The result is that the MLP will withhold 39.6 per cent tax on any distributions paid to non-resident, non-U.S. citizens.

"That alone should give a Canadian taxpayer pause before investing directly in an MLP," says Jamie Golombek, managing director, tax and estate planning, with CIBC Wealth Strategies Group.

"But it gets worse," says Mr. Golombek, who points out that, technically, the Canadian investor is supposed to file a U.S. tax return to report the income allocated to him or her by the MLP. While the Internal Revenue Service is unlikely to chase down a Canadian investor who doesn't file a U.S. return, "the U.S. withholding tax will likely exceed the investor's actual U.S. tax liability and the only way to get the excess tax back is by filing a U.S. tax return," he says.

From a Canadian tax-filing perspective, things get even more complicated, he says. A Canadian taxpayer must report his or her allocated share of the MLP's income, which will likely not be the same as the amount actually distributed. MLPs typically use U.S. tax rules to calculate this amount, but a Canadian investor is technically supposed to recalculate that income under Canadian tax rules, which in most cases is either impractical or impossible, he says.

"Assuming that the allocated income is properly reported on the Canadian return, Canada will permit a foreign tax credit to be claimed for the actual U.S. tax liability – but keep in mind that this amount can't be known without completing a U.S. tax return," he says.

Finally, investors should note that the 39.6-per-cent withholding tax on MLP distributions applies to all account types – both registered and non-registered. This is in contrast to U.S. dividend income, which – under the Canada-U.S. tax treaty – is exempt from U.S. withholding tax for registered retirement accounts and subject to a reduced rate of 15 per cent for non-registered accounts, tax-free savings accounts and registered education savings plans.
Sr. Member
Oct 31, 2009
564 posts
100 upvotes
Chance7652 wrote: The withholding tax on dividends is nearly 40% and applies to all accounts. Its what kept me away from US MLPs, which in the end probably saved me from myself...

If your still interested in Pipelines I think your much better off owning a Canadian one or one of the US C Corps. There are a handful of well run ones where despite the headwinds the dividend looks safe.

Here is a G&M article.

https://www.theglobeandmail.com/globe-i ... 20citizens.
Thanks a lot for your reply. I just realized how huge the withholding tax on MLP's. I actually just check my brokerage account and showed 0.37 tax withheld ouchhhh! on my EPD holdings. I guess time to move on and sell this MLP. The good thing at least I'm on the upside of this stock.
Jr. Member
Apr 8, 2017
197 posts
54 upvotes
Hey Rod,

Two questions in regards to your Smith Maneuver portfolio:
1- is it separate from your Dividend portfolio on your website
2- Do you invest in US equities using Smith Maneuver or purely Canadian equities?

Cheers and thanks for your continuous spread of financial literacy.
[OP]
Deal Fanatic
User avatar
Dec 14, 2010
6081 posts
6956 upvotes
ShuttleBoy wrote: Hey Rod,

Two questions in regards to your Smith Maneuver portfolio:
1- is it separate from your Dividend portfolio on your website
2- Do you invest in US equities using Smith Maneuver or purely Canadian equities?

Cheers and thanks for your continuous spread of financial literacy.
1. The portfolio on the website was created as if I was starting from scratch, as documented on this thread. So it doesn’t have all holdings that I have on my personal portfolio, because I have been investing longer than when this thread started. The SM portfolio is dedicated to that only. Only Canadian companies (to take advantage of tax credit) and only eligible dividends (no ROC or interest). I do have a separate margin account to trade other vehicles, like options and growth stocks. This way, I have a clean tracking / money trail of how funds were solely used to invest and how only dividends are withdrawn (if CRA ever asks).

2. No, only Canadian stocks, for better tax treatment. Foreign dividends are taxed at my tax bracket, so prefer I hold US stocks on RRSP (investing) and TFSA (trading).


Rod
Build a comprehensive portfolio based on Investing and Trading strategies. Check out these threads and join the discussion:

Investing strategy based on dividend growth

Trading strategy based on Graham principles.
Jr. Member
Apr 8, 2017
197 posts
54 upvotes
rodbarc wrote: 1. The portfolio on the website was created as if I was starting from scratch, as documented on this thread. So it doesn’t have all holdings that I have on my personal portfolio, because I have been investing longer than when this thread started. The SM portfolio is dedicated to that only. Only Canadian companies (to take advantage of tax credit) and only eligible dividends (no ROC or interest). I do have a separate margin account to trade other vehicles, like options and growth stocks. This way, I have a clean tracking / money trail of how funds were solely used to invest and how only dividends are withdrawn (if CRA ever asks).

2. No, only Canadian stocks, for better tax treatment. Foreign dividends are taxed at my tax bracket, so prefer I hold US stocks on RRSP (investing) and TFSA (trading).


Rod
I will setup my mortgage for Smith Maneuver when i renew in a few months, but i have access to unsecured LOC at 2.2% > 150k, my risk level is relatively high but i maintain very low leverage ratio. Would you consider dumping big amounts of leveraged funds in Dividend stocks If i am able to repay this money back in ~3 years without using the generated dividends?

Since the purpose of my discussion is Dividend Growth Strategy i posted it in this thread, no intentions to hijack the thread and turn it into leverage or Smith maneuver discussion.
Sr. Member
Oct 31, 2009
564 posts
100 upvotes
We all know that REITs have mostly been battered heavily with this pandemic. A few of them still has very solid fundamentals and now at a considerable discount. Which of these three (REI.UN, SRU.UN, and CHP.UN) do you think is poise to have a good or even an excellent recovery in the future?
Deal Guru
Jan 27, 2006
14547 posts
7444 upvotes
Vancouver, BC
desertfox wrote: We all know that REITs have mostly been battered heavily with this pandemic. A few of them still has very solid fundamentals and now at a considerable discount. Which of these three (REI.UN, SRU.UN, and CHP.UN) do you think is poise to have a good or even an excellent recovery in the future?
The market is telling you with the yields what it believes will be the best bet - CHP.UN. Personally, SRU.un looks fine to me as Walmart isn't going anywhere! In fact, I believe Walmart is pumping billions into their facilities in Canada so that could only mean more stability at least for SRU.un.
Sr. Member
Oct 31, 2009
564 posts
100 upvotes
craftsman wrote: The market is telling you with the yields what it believes will be the best bet - CHP.UN. Personally, SRU.un looks fine to me as Walmart isn't going anywhere! In fact, I believe Walmart is pumping billions into their facilities in Canada so that could only mean more stability at least for SRU.un.
Thanks @CraftMan . We already owned CHP.UN and SRU.UN in our TFSA but have not really added during this pandemic. I know for sure that they are at a huge discount right now but that was our mistake in the previous years. We were not well diversified. We hold so many REITS, and large portion with the energy sector too. Instead we use the divvy from our REITs to start positions in other sectors. My thoughts are the same. CHP.UN and SRU.UN will do well in the future.
Sr. Member
User avatar
May 12, 2012
618 posts
684 upvotes
Richmond Hill, ON
desertfox wrote: We all know that REITs have mostly been battered heavily with this pandemic. A few of them still has very solid fundamentals and now at a considerable discount. Which of these three (REI.UN, SRU.UN, and CHP.UN) do you think is poise to have a good or even an excellent recovery in the future?
I asked this question on the previous page. Would highly recommend checking out the post #4607. REITs are still undervalued, especially commercial spaces. I've seen little upward movement for the aforementioned yet dividends remain intact (REI had its distribution announcement on the 14 of August, SRU still posted healthy Q2 numbers despite 'rent forgiveness' earlier in the quarter and collection rates have been steadily improving on a month-by-month basis, and as @craftsman stated, a huge portion of their clientele is Walmart).

Check out AP.UN as well (ex-dividend 30th). They run office spaces in the Toronto core as well as other cities. Primary clients include banking, government, IT, marketing and telecom. Expected to have little to modest growth year-end. Stock has taken a slight dip in the past few days of trading.

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