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Avoided all cyclicals so I ended up with basicly banks, financials, utilities, pipelines and a few others, but not heavily invested in those.
That's pretty similar to my 5 pack approach. I pick the largest XIU constituents and form an equal sector weight portfolio of: financials, utilities, industrials, energy, telecom. Currently this is RY, FTS, CNR, ENB, BCE. This portfolio has 3.7% dividend yield.

I decided on this construction due to the strong total returns, but it happens to also pay out a lot in dividends. In my case I reinvest all dividends (not DRIP, but redeploy periodically) so the dividends don't mean anything special to me.
 

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I'm warming up to the idea of just using XAW for everything outside of Canada. It's half US already, and it seems like the right kind of formulation. I'd like to see a longer track record on XAW, though.
I also have XWD for a good portion of my ex-Canada holdings. It was all that was available at the time. XAW is a better choice (half of the MER and doesn't contain a 3.48% Cdn component like XWD does). Can't switch...not with over 100% unrealized cap gains. C'est la vie......
 

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I'm warming up to the idea of just using XAW or VXC for everything outside of Canada. It's half US already, and it seems like the right kind of formulation. I'd like to see a longer track record on XAW, though.
Had a look at XAW/VXC. Probably OK for someone your age. But designed as a long term growth holding. I don't have time left for that :(
 

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That's pretty similar to my 5 pack approach. I pick the largest XIU constituents and form an equal sector weight portfolio of: financials, utilities, industrials, energy, telecom. Currently this is RY, FTS, CNR, ENB, BCE. This portfolio has 3.7% dividend yield.

I decided on this construction due to the strong total returns, but it happens to also pay out a lot in dividends. In my case I reinvest all dividends (not DRIP, but redeploy periodically) so the dividends don't mean anything special to me.
They may not mean much to you, but look at the growth of the dividends with just those stocks mentioned, all star holdings in five sectors. IMO if one held nothing else they'd be fine.
 

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They may not mean much to you, but look at the growth of the dividends with just those stocks mentioned, all star holdings in five sectors. IMO if one held nothing else they'd be fine.
I agree that these are great holdings. I didn't mean that the dividends are worthless, just that I consider them part of the total return -- I'm not extracting them as cash payouts.
 

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You have a good problem :) My parents are in the same boat with XSP ... It's just hard to dump it currently.


here's a simple strategy for curing the can't-sell-because-capital-gains-will-kill-me blues.

the catch is that one has to start youngish. Maybe age late 50s or 60s. It won't work late in life, there won't be enough years.


step 1 - investor holds 1000 shares with cost of 45.00/sh while market is 90.00. Total cost was $45,000. Investor now buys an extra 100 shares @ 90 to hold 1,100 sh. Cost base is now $54,000 or 49.09/sh.

step 2 (a) - inv donates 100 shares to a charity & receives tax deductible receipt for $9,000. No taxable gain. Remaining holding is 1000 shares w cost base $54,000 or 54/sh.

or

step 2 (b) - inv sells 100 shares at 90.00, for a taxable capital gain of 36, or $3,600. Only $1,800 or 50% of this gain will be included in taxable income. It's a piffle amount, will likely not be enough to push investor into next higher tax bracket. Investor should run a tax scenario first to confirm though.

remaining holdng becomes 1000 shares w same cost base, $54,000 or 54/sh.


an investor who has losses to offset can buy/sell more shares in step 2. The key thing is to keep repeating this, a micro-sale every year, year after year.

it's a little more tax efficient to buy first, then sell or donate. However the manoeuvre can certainly be done sell first, then buy to replace.

hint: don't push cost base too high, if a market correction occurs you'll be sorry. In my case, the risk of option assignment requires that cost be kept at a reasonable level. My theoretical goal is cost roughly 25% below market, but these days with markets so high it's ragged.

.
 

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Question for the dividend growth investors out there.

Do you choose individual stocks for your dividend growth portfolio?
If so, how many individual stocks do you have?
Do you rotate out with a Dogs of the TSX approach or just buy and hold/DRIP?

Or do you use a dividend ETF?
If so, what ETF do you use?


I only have about a dozen companies, with core holdings being a couple of companies in financials, pipelines, utilities, telecoms, and some miscellaneous.
The limited diversification is likely going to get me spanked but that's what is it right now.
I hold and DRIP.
Limited diversification might be what saves you. Over diversification can be a heavy weight, and a performance killer. Don't by low quality companies just for the sake of diversification. A dozen is likely fine, but a few more isn't necessarily bad either. It isn't the exact number that is important, its the quality. Debt/equity has to be reasonable for the industry of the company. Return on equity should be above average as well- say 14-15% or better. It doesn't make sense to buy a company with out of control debt, and a minimal return on equity just to be diversified.

Dividend etf: I don't use them myself. The fees are lower than mutual finds, but they are ongoing fees. Why not just buy individual stocks for a one time low comission? I'm not against people using etf's if that's what suites them, but you already have individual stocks, so why go back?

I have about 17 dividend payers, and will hold them as long as the fundamentals keep them in the quality range.
I also have about a half dozen growth stocks to juice up cap gain returns. Eventhough I'm retired I'm OK with this. Younger people should definately consider growth stocks. When they get older they can transition into higher dividend stocks. You can reach your goals of retirement dividend income much faster.

My fictional Canadian growth portfolio of 10 stocks is up about 24% in the last 12 months, and my fictional dividend income portfolio of 10 stocks total return is about 11% in last 12 months. A balanced portfolio of 5 growth and 5 dividend payers is up 19.7% in last 12 months. This is while the tsx index has been drifiting down since last Jan-Feb.
I use a mix of growth and dividend payers, but not 50/50. about 70% dividend growers.
 

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When I started investing, there were very few ETFs, and the ones available were large index ETFs rather than specialized dividend ETFs. For that reason, I started picking my own stocks, and I have never considered using an ETF.

I have 50 stocks - probably too many, but I buy and hold usually, so I tend to accumulate more stocks as time goes on.

The mix is 85% CDN, 15% US though some of the CDN (for example my biggest holding BIP.UN) are companies which derive their income mostly from outside of Canada, and some of the CDN stocks pay dividends in US dollars. I have some preferreds (rate-reset) which I bought with a particular strategy to take advantage of rising interest rates.

I have some REITs, and some smaller cap dividend payers. In total the dividends amount to just over 5% of the portfolio value.

My biggest holdings are: BIP.UN, RY, IPL, BNS, EMA
 

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Discussion Starter · #30 ·
We just about were in the mid-90s when we just about hit the debt wall. Had Paul Martin not did what he did when he did, we could have easily slid to a 50 cent loonie rather than just 63 cents. The point being: Don't say it cannot happen here.....and hence why I will always have a healthy allocation to other regions and especially the USA.
+1 to that comment. That was a pretty key inflection point in Canadian fiscal policy.
 

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Discussion Starter · #31 ·
Getting back to the OP's original post, I stock pick Canada and ETF ex-Canada. As Agent suggested, there are way too many stocks ex-Canada to be worth spending any of my time on them. Example: VTI works perfectly fine for USA.
That's what I'm generally what I'm trying to do with my non-registered portfolio primarily being Canadian dividend growth stocks and registered portfolios ETF ex-Canada. However, the enchanting lure of the FANG "sirens" is hard to ignore. :)
 

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Poo does and will happen sometimes...

So...this is where I personally feel diversification is important.

Just did a tally....own 40 CDN dividend stocks + a few U.S. multinationals (JNJ, PG, KO, EMR, DUK, SO, ED, VZ, T).
Indexing everything else using VTI or HDV or VYM. Slowly building up some VXUS.

Like other CDN dividend investors - own banks, lifecos, pipelines, utilities and REITs for income and likely always will unless these companies flat out kill their dividend.
 

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I also have XWD for a good portion of my ex-Canada holdings. It was all that was available at the time. XAW is a better choice (half of the MER and doesn't contain a 3.48% Cdn component like XWD does). Can't switch...not with over 100% unrealized cap gains. C'est la vie......
I was reading up and considering XAW for my non-registered US component also. No room left in my tfsa s or anywhere else. Is there a lot of work at tax time to it?
Cheers
Doc
 

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I was reading up and considering XAW for my non-registered US component also. No room left in my tfsa s or anywhere else. Is there a lot of work at tax time to it?
Cheers
Doc
I don't own it. But the T3 will likely show Foreign Income, possibly some return on capital (but not likely since it is all ex-Canada) and just as importantly, it might have phantom re-invested distributions that you have to get off the BlackRock website in January of each year. I just looke up its historical distributions and indeed it did have a phantom re-invested distribution for 2016 (but not 2015). Phantom re-invested distributions are not shown on the T3 tax slip but they are important to you because they INCREASE your ACB.

I don't find this sort of thing onerous... Takes just maybe 10 minutes per ETF each March to adjust one's ACB. The T3 tax slip is plenty simple enough to fill in the right boxes in tax software.
 

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I don't own it. But the T3 will likely show Foreign Income, possibly some return on capital (but not likely since it is all ex-Canada) and just as importantly, it might have phantom re-invested distributions that you have to get off the BlackRock website in January of each year. I just looke up its historical distributions and indeed it did have a phantom re-invested distribution for 2016 (but not 2015). Phantom re-invested distributions are not shown on the T3 tax slip but they are important to you because they INCREASE your ACB.

I don't find this sort of thing onerous... Takes just maybe 10 minutes per ETF each March to adjust one's ACB. The T3 tax slip is plenty simple enough to fill in the right boxes in tax software.
Thanks AltaRed
I Appreciate the info. I haven't got any US coverage yet but would like to add it to my non reg legacy accounts.
Cheers
Doc
 

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I was reading up and considering XAW for my non-registered US component also. No room left in my tfsa s or anywhere else. Is there a lot of work at tax time to it?
I don't own it.

But the T3 will likely show Foreign Income, possibly some return on capital (but not likely since it is all ex-Canada) and just as importantly, it might have phantom re-invested distributions that you have to get off the BlackRock website in January of each year. I just looke up its historical distributions ...
Actually it looks like it will have Return of Capital (RoC) as the 2016 tax breakdown shows the types of income paid as "Capital Gains", "Return of Capital", "Foreign Income" and "Foreign Tax Paid". The phantom distribution is not supposed to be received as cash so there may be CG to pay tax on, in addition to the phantom distribution.

The 2015 breakdown is easier as it is only "Capital Gains", "Foreign Income" and "Foreign Tax Paid". From what AltaRed has said, there are no phantom distributions in 2015.

http://www.taxtips.ca/personaltax/investing/taxtreatment/etfs.htm


... I don't find this sort of thing onerous... Takes just maybe 10 minutes per ETF each March to adjust one's ACB. The T3 tax slip is plenty simple enough to fill in the right boxes in tax software.
I moved my ETFs into registered accounts but have to do similar for REITs. The time consuming part for me was learning what info was needed, where to find it and tweak my spreadsheet to take these into account.

The T3 forms from the broker roll up as many as five investments so I usually spot check the sub-totaled numbers against what the investment web site has published around March.

Tedious but not particularly time consuming.


Cheers
 

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Indeed, if one has more than one ETF on the T3 tax slip, one needs to look at the sub-totals on the accompanying Summary of Annual Income and Expenses to attribute the correct ROC to the right ETF. My ex has 6 Cdn domiciled ETFs in her non-reg account. It takes me about half an hour each year to update her ACB database for ROC and to check each of the BlackRock and BMO websites for phantom re-invested distributions. I think about half of her ETFs had ROC in 2016 and about half had re-invested distributions that required updating of her ACB database. It simply does not take much time at tax time to do both on a small number of ETFs.

With a Couch Potato portfolio, with no trades and no DRIPs, it really is about as simple as it can get. There are no entries to work through on Schedule 3 or ACB updates needed on DRIP'd distributions.

IMO, people complain way too much about ACB adjustments with ETFs.
 
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