Investing

Why Dividend Investing is not a great idea

  • Last Updated:
  • Sep 24th, 2020 5:53 pm
Sr. Member
Feb 13, 2008
522 posts
222 upvotes
Edmonton, AB
xgbsSS wrote: 1)Selling doesn't lose your contribution room forever. It already is "lost" in that it is down from when you invested. You only lose it if you withdraw. Selling stocks you don't want to hold is much better. Then you can reallocate the funds appropriately to your needs and wants

2)Unlikely to happen. Past and future ones won't. If anything there is more talks it will rise. And if you wait, you could face a larger one if you have to sell more shares and trigger it in a higher tax bracket.
That's true. I agree.
Deal Addict
Jul 23, 2007
4156 posts
2256 upvotes
As usual the international media neglects Canada like we don't exist even though compared to Europe and the U.S. we've probably had a pretty good run at mostly sustaining and increasing dividends year to date.

Financial Times via Financial Post

COVID-19 sparked a dividend drought for investors. But it may be hurting pensioners more than Wall Street fat cats

Towards the end of the article I fully agree.

Even pension funds at the end of the day are people. Dividends are a way to sustain the population at a time of great stress,” says Daniel Peris, a fund manager at Federated Hermes, a Pittsburgh-based investment manager. “We’re not trying to starve a company of capital. We’re saying, as smaller shareholders, whatever profits are left after the necessary investments and debt should be distributed.”

Peris says it is possible that the pandemic leads to a more forceful shift towards “stakeholder capitalism,” at a cost to the returns that shareholders have grown to expect. But he argues the consequences of such a radically new social contract should not happen haphazardly.

“If it did happen, we (would) need to throw out all the books. The math is not the same,” he says. “This could be a pivot in the nature of capital markets, that just needs to be done in a considered fashion. Without cash distribution, the market becomes a casino.
[OP]
Deal Addict
Nov 9, 2013
3912 posts
3598 upvotes
Edmonton, AB
Stryker wrote: As usual the international media neglects Canada like we don't exist even though compared to Europe and the U.S. we've probably had a pretty good run at mostly sustaining and increasing dividends year to date.

Financial Times via Financial Post

COVID-19 sparked a dividend drought for investors. But it may be hurting pensioners more than Wall Street fat cats

Towards the end of the article I fully agree.

Even pension funds at the end of the day are people. Dividends are a way to sustain the population at a time of great stress,” says Daniel Peris, a fund manager at Federated Hermes, a Pittsburgh-based investment manager. “We’re not trying to starve a company of capital. We’re saying, as smaller shareholders, whatever profits are left after the necessary investments and debt should be distributed.”

Peris says it is possible that the pandemic leads to a more forceful shift towards “stakeholder capitalism,” at a cost to the returns that shareholders have grown to expect. But he argues the consequences of such a radically new social contract should not happen haphazardly.

“If it did happen, we (would) need to throw out all the books. The math is not the same,” he says. “This could be a pivot in the nature of capital markets, that just needs to be done in a considered fashion. Without cash distribution, the market becomes a casino.
It is interesting how many big Canadian div payers are basically regulated monopolies. I scratch my head with why they are ignored by many international investors. Like, why would wouldn't Warren Buffett buy shares in a company like TD, RY, CP, CNR, many Canadian utilities, or the Canadian telecoms.

Edit - I haven't done the calculation, but imagine WEB bought RY or TD in 1988 instead of KO. From what I've quickly been able to google, KO CAGR is 11% while RY has been 14%.
Keep calm and go long
Newbie
Jul 22, 2018
70 posts
40 upvotes
treva84 wrote: It is interesting how many big Canadian div payers are basically regulated monopolies. I scratch my head with why they are ignored by many international investors. Like, why would wouldn't Warren Buffett buy shares in a company like TD, RY, CP, CNR, many Canadian utilities, or the Canadian telecoms.

Edit - I haven't done the calculation, but imagine WEB bought RY or TD in 1988 instead of KO. From what I've quickly been able to google, KO CAGR is 11% while RY has been 14%.
Does buffet buy non american companies? Does the % take into account current exchange rate?
[OP]
Deal Addict
Nov 9, 2013
3912 posts
3598 upvotes
Edmonton, AB
BardoonD52881 wrote: Does buffet buy non american companies? Does the % take into account current exchange rate?
He does - for example most recently he has owned shares in SU.

Good point re the exchange rate - it does not.
Keep calm and go long
Deal Fanatic
User avatar
Sep 1, 2013
5656 posts
596 upvotes
treva84 wrote: It is interesting how many big Canadian div payers are basically regulated monopolies. I scratch my head with why they are ignored by many international investors. Like, why would wouldn't Warren Buffett buy shares in a company like TD, RY, CP, CNR, many Canadian utilities, or the Canadian telecoms.
The fact that he doesn't buy them makes me wonder if we, as a country, should have these regulated monopolies in the first place.
Newbie
Jul 22, 2018
70 posts
40 upvotes
I hate how the regulated monopolies have such horrid customer value in banking and telecom.

you cant get unlimited mobile data in canada while in usa its everywhere. canada per month is gouging for a few gigs.

investment banking you cant get free commissions or fractional shares.

i really hope govt gets rid of these companies or atleast stops them from being a monopoly, who keeps them in power libs or conservatives? both?
Newbie
Jun 6, 2017
90 posts
151 upvotes
BardoonD52881 wrote: I hate how the regulated monopolies have such horrid customer value in banking and telecom.

you cant get unlimited mobile data in canada while in usa its everywhere. canada per month is gouging for a few gigs.

investment banking you cant get free commissions or fractional shares.

i really hope govt gets rid of these companies or atleast stops them from being a monopoly, who keeps them in power libs or conservatives? both?
Rogers has unlimited data plans and Interactive Brokers has fractional US shares in some accounts. Your point stands about price and competition in Canada but if everyone left the major banks brokerages for the discount brokers they would be more competitive I think. A lot of the factors here are in the fact that we’re a smaller market I believe although regulation is another factor (not all bad) that leaves us stuck with this situation.
[OP]
Deal Addict
Nov 9, 2013
3912 posts
3598 upvotes
Edmonton, AB
CheapScotch wrote: The fact that he doesn't buy them makes me wonder if we, as a country, should have these regulated monopolies in the first place.
It's a good point, especially in a "free market" economy. You could argue Big Tech in the US is a regulated monopoly as well, although they are likely to soon face anti-trust lawsuits.
Keep calm and go long
[OP]
Deal Addict
Nov 9, 2013
3912 posts
3598 upvotes
Edmonton, AB
BardoonD52881 wrote: I hate how the regulated monopolies have such horrid customer value in banking and telecom.

you cant get unlimited mobile data in canada while in usa its everywhere. canada per month is gouging for a few gigs.

investment banking you cant get free commissions or fractional shares.

i really hope govt gets rid of these companies or atleast stops them from being a monopoly, who keeps them in power libs or conservatives? both?
As a consumer, I agree. As an investor, it allows them great pricing power and should in theory lead to future outsized returns.

How did / does it happen? Probably through very astute lobbying on the corporations behalf.
Keep calm and go long
Member
Jul 30, 2012
449 posts
445 upvotes
treva84 wrote: As a consumer, I agree. As an investor, it allows them great pricing power and should in theory lead to future outsized returns.

How did / does it happen? Probably through very astute lobbying on the corporations behalf.
One of my themes is to own investments in monopoly / oligopolies where I have (and others) little choice but to pay for the services. If I have to own a cell phone, I'm going to own a telecom stock(s), if I have to use an online brokerage platform, I'm going to own a Bank(s), if I have to use electricity/heat, I'm going to own a utility, etc. It's how I justify getting a "return of capital" via dividends on utilities & "services" that are basically staples / non-discretionary spends.
Newbie
Jul 22, 2018
70 posts
40 upvotes
AllanMar wrote: Rogers has unlimited data plans and Interactive Brokers has fractional US shares in some accounts. Your point stands about price and competition in Canada but if everyone left the major banks brokerages for the discount brokers they would be more competitive I think. A lot of the factors here are in the fact that we’re a smaller market I believe although regulation is another factor (not all bad) that leaves us stuck with this situation.
The way the telecom is setup is certain providers are better in different provinces. I don't think rogers coverage is very good where I am at.

Interactive brokers, only heard of it on these forums. I will have to look into it. Do they have a min limit required? I also heard their commissions are low but not 0. Is their service good?

I don't think everyone has to leave their major banks and move to discount brokerages. One of them should provide it and gain market share over the others and this brings in fear of further loss of market share and the rest should follow and improve their services provided to the customers much like in America.

Smaller market should help increase innovation and faster change. But I suppose there is fear of other foreign companies taking over. But this shouldn't stop the local ones from competing with each other instead of holding hands and chopping up Canada into their own territories.
Newbie
Jul 22, 2018
70 posts
40 upvotes
treva84 wrote: As a consumer, I agree. As an investor, it allows them great pricing power and should in theory lead to future outsized returns.

How did / does it happen? Probably through very astute lobbying on the corporations behalf.
As a dividend investor I suppose it would be good. But I think that might be one of the reasons why its not such a great idea, You are hosing your customers and leading to a lack of innovation which will come back to haunt you eventually.
Newbie
Jul 22, 2018
70 posts
40 upvotes
DealRNothing wrote: One of my themes is to own investments in monopoly / oligopolies where I have (and others) little choice but to pay for the services. If I have to own a cell phone, I'm going to own a telecom stock(s), if I have to use an online brokerage platform, I'm going to own a Bank(s), if I have to use electricity/heat, I'm going to own a utility, etc. It's how I justify getting a "return of capital" via dividends on utilities & "services" that are basically staples / non-discretionary spends.
This seems like giving money to the people that whip you, and further imprisoning other people into that cycle. You can decide who to support with your capital, not limited to Canadian oligopolies.

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