When it comes to investing, everyone has a different opinion. Nothing wrong with that. But as a Canadian investor there is also nothing wrong with having a home bias. So much is written about how small the Canadian market is, that it is concentrated too much on financials and energy, and more. But we have some proven strategies that show otherwise. The BTSX strategy has a history of over 30 years that has outperformed the TSX, and the US markets. And is a simple strategy that any novice can do. You buy the 10 highest yielding dividend stocks in equal quantities on the TSX. You hold them for a year and repeat.
I don’t know anyone that follows this strategy exclusively but is a part of many investors strategy that I do know. Our own portfolio is 80% Canadian and 20% US. 90% are dividend stocks that are all long term holds. Our own returns show how well this strategy works. Average annual gain of 11.6%.
Here are my reasons for being a Canadian Dividend Investor.
Investing in Canadian dividend stocks can be a lucrative strategy for both novice and experienced investors. These stocks offer a unique combination of potential capital appreciation and a regular stream of income in the form of dividends. One of the key principles that can help you maximize the benefits of investing in Canadian dividend stocks is staying invested for the long term.
Reliable Income Stream:
Canadian dividend stocks are known for their consistent dividend payments. Many Canadian companies have a strong history of not only paying dividends but also increasing them year after year. By staying invested, you can benefit from a reliable income stream that can help you meet your financial goals, whether it’s supplementing your retirement income or funding other investments.
Compounding Growth:
Dividend reinvestment is a powerful tool for wealth accumulation. When you reinvest your dividends into additional shares of the same stock, you allow your investment to grow exponentially over time. The compounding effect can significantly boost your overall returns. Staying invested for the long term allows you to take full advantage of this growth potential.
Lower Taxation:
In Canada, dividends are taxed more favorably than interest income or capital gains. The Canadian government offers tax incentives for dividend income, making it an attractive option for investors. By holding your Canadian dividend stocks for an extended period, you may benefit from these tax advantages and potentially reduce your overall tax liability.
Ride Out Market Volatility:
Financial markets are inherently volatile, and short-term price fluctuations are common. By staying invested in Canadian dividend stocks, you can ride out market ups and downs with more resilience. Over the long term, the impact of market volatility tends to diminish, and dividend income can provide stability during turbulent times.
Capital Appreciation:
While the primary focus of Canadian dividend stocks is income, many of these stocks also have the potential for capital appreciation. By staying invested, you can benefit from the growth of your portfolio over time in addition to the dividend income. This dual benefit can significantly enhance your overall returns.
Diversification:
Canadian stock markets offer a wide range of sectors and industries, providing ample opportunities for diversification. By staying invested in a diversified portfolio of Canadian dividend stocks, you can spread your risk and potentially reduce the impact of poor-performing stocks on your overall portfolio.
Conclusion:
Staying invested in Canadian dividend stocks is a time-tested strategy for building wealth and securing a steady stream of income. By focusing on the long term, you can harness the power of compounding, benefit from favorable tax treatment, and ride out market volatility with confidence. Whether you’re a seasoned investor or just starting, Canadian dividend stocks can be a valuable addition to your investment portfolio when approached with a patient and committed mindset. Remember, it’s not just about getting in; it’s about staying invested for the long haul to maximize your financial success.
There is no reason to buy ETFs when you can so easily create your own.
Thanks Don G. Sorry for the late reply. (don’t get many comments) I really like your approach to investing. It proves that you do not need to diversify too much and a lot of conventional advise is only to sell more managed investments.
Wow, tripled your divy income. Very impressive. We also have more then we need, but instead of building more we are allowing ourselves to be way more generous in giving to charities, and lifestyle. It is great to have these choices. Thanks for your comments Don.
Hey Divinvestor
Nice to see a new post from you and as usual, you’re spot on.
I saw your comment on Matt’s BTSX website about the 60/40 portfolio. Good for you on your comment. I also think bonds are a total waste of time compared to divy stocks and are just for people that can’t handle short term market volatility.
My wife & I have a very similar investment strategy as you except we are 100% invested in TSX dividend growth/income stocks without any direct USA exposure (as compared to your 20% USA). When the dust settles, we are very closely in sync with Henry Mah and just like him, we only hold 12 main TSX stocks but are even more limited with just 4 sectors – banks, utilities, midstream, and telcos.
I’ve been retired for over 10 years without any company pension. We generate significantly more dividend income than we need for all expenses. Instead of DRIPing, we just build up the extra cash and buy more of what we already own in $5k increments. It’s been working like a charm.
Since retirement in mid-2013, our divy income has more than tripled . I think it’s safe to say we have a 99.999% chance of never running out of dough. 🙂
Take her easy
DOn