[MrBlackhill]

I think when I was comparing low dividends stocks to high dividends stocks, I was oversimplifying.

Best stocks will simply be those who initiated a dividend (no matter how low or how big) and that are growing their EPS fast, leading to growing their dividends fast, as long as their dividend growth is slower than their EPS growth or that their payout ratio is still low. And if their EPS growth is much faster than their dividend growth, that makes them awesome candidates as long as they have a great RoE.

So, based on this list (Best Canadian Dividend Growth Stocks – 2021 Updated!), it makes these stocks the best choices, in my opinion:

• AQN
• CNR
• ATD-B
• EMA
• NA

the price going down after dividends is irrelevant if the price goes right back up shortly after which is [mostly] does (assuming its a good company).

It's still a downwards move because all that money they've paid to their investors cannot be used to reinvest in their own company. It's not because the trend of the stock is to move up that it makes the downwards moves irrelevant.

I'm pretty happy that CSU, CNR, CP, ATD-B pay low dividends because they have a high RoE.

-----

Anyways, we are debating out of the main subject of this thread.

 

[james4beach]

^ exactly my point

The market only moves up by an average of 0.04% per trading day. This does not compensate for the sharp drop in price due to dividend payouts on the ex dividend date, which is easily 0.75% or more depending on the stock.

 

[MrMike]

Anyways, we are debating out of the main subject of this thread.

right, sorry... I did enjoy it though

 

[fireseeker]

... the price going down after dividends is irrelevant if the price goes right back up shortly after which is [mostly] does (assuming its a good company).

I think the logic is still misfiring. The relevant factor is why the stock rises after the dividend is paid.

Say you've got a bank stock with a 4% annual dividend, or 1% each quarter. It pays out its 1% on a Monday, but by Friday the stock is right back at its previous level. Fabulous, right? You've just pocketed 1% for free!

But what if the bank sub-sector was up 1% that week? It means your return simply matched that of the sector.

It's never that neat, of course. But if you strip out the market noise, you can see that when $1 million company pays a $1,000 dividend it is worth $1,000 less. What happens after that is the market doing its thing. The money doesn't grow on trees.

 

[agent99]

It's never that neat, of course. But if you strip out the market noise, you can see that when $1 million company pays a $1,000 dividend it is worth $1,000 less. What happens after that is the market doing its thing. The money doesn't grow on trees.

On the other hand, the dividends paid out are now in the hands of the shareholders. So they are no worse off and they and the economy as a whole could perhaps be better off. (depending on what they do with the dividend).

 

[james4beach]

It's never that neat, of course. But if you strip out the market noise, you can see that when $1 million company pays a $1,000 dividend it is worth $1,000 less. What happens after that is the market doing its thing. The money doesn't grow on trees.

That's true. It's not free money.

On the other hand, the dividends paid out are now in the hands of the shareholders. So they are no worse off

Also true. There is absolutely no harm to the dividend. There is no money lost along the way ... it's just a neutral event.

And many people find the routine dividend payouts convenient, and also comforting. THAT has value too.

 

[MrMike]

I think the logic is still misfiring. The relevant factor is why the stock rises after the dividend is paid.

The reason why doesn't matter (in this context) - the fact is, it does rise. So people saying dividends come out of the stock, who cares if, as you say, "...the stock rises after the dividend is paid" and that's my point! If its not enough to notice, then who cares if it's technically true.

I get you may want to defend your position because, to be on this forum at all, means you care and look harder than most people. But for the majority of retail investers, dividends are awesome and that's all they see. They don't see the micro dip of a stock paying its dividends - that's why I say that point is irrelevant (although technically true).

 

[MrBlackhill]

They don't see the micro dip of a stock paying its dividends

Go in Yahoo Finance and look at the historical data for ENB.TO

It is trading around $40 and paying $0.81 dividend every quarter. Look at the price before the dividend and after the dividend. It drops by almost -2% each time. It happens 4 times per year, so that's a price drop of nearly -8%.

That's because ENB.TO increased its dividend over and over while its price doesn't keep up. In 2013 it was also trading around $40 but paying $0.315 dividend every quarter, so it was a quarterly price drop of -0.75% (total -3%) instead of the current price drop of -2% (total -8%).

They are now paying a big dividend at insane payout ratio so it's pretty risky in my opinion as investors are only buying ENB for its dividend but don't believe ENB is worth more so if ever they have to pullback (cut) their dividends it could hurt its price so much and its future also.

 

[MrBlackhill]

If I try to get back to the subject of this thread...

Even if I feel S&P 500 is safe to continue its bullish run, you known what feels dangerous? The Volatility Index is still above 20, which means still at the same level of 1997-2003 and 2007-2008.

As proven during the dot-com bubble, VIX can stay above 20 during long bullish runs of 3 years, so we never know when things turn south. But if I combine the fact that VIX was above 20 and the S&P 500's 5-year rolling return was above 25% in April 1999, I think it's a good clue that things were in a bubble and you should sell. S&P 500's current 5-year return is "only" 16%, so it seems pretty fair even if volatility is high. NASDAQ's current 5-year return is 25% and I'd argue that reaching a 30% with high volatility would be a bubble for NASDAQ, so it's a bit more scary.

 

[agent99]

The reason why doesn't matter (in this context) - the fact is, it does rise.

You are right that what should happen in theory, doesn't always happen in practice. The market is alive - it doesn't know what it is supposed to do!

I at one time tried playing that game in a registered account. More for fun than anything. This in the days of income trusts. Most Trusts paid substantial monthly dividends. Dividend dates were not always the same - sometimes a week or so apart. I would double dip. Collect a 'dividend' from one trust, hold it for a week or so. It would often recover in price after the initial dividend dip. Sell and buy another just before it's dividend date. Collect another dividend. Hold for a week or two, then repeat. But this was just a game just to see if it could be done. It could, but I did need to pay a lot of attention to the market and the timing.
(Note: Used Dividends above - Trust actually paid distributions rather than dividends (just like REITS do now)

 

[MrBlackhill]

I hope NASDAQ won't touch 14,000 this year. If it does, I hope it'll correct itself pretty fast.

NASDAQ reached 14,000... Should we remind ourselves that back in June 2020 we were amazed by NASDAQ reaching 10,000 for the first time? After a flash crash and recovery? And now 7-8 months later, we are 40% higher?

When was the last time that NASDAQ's trailing 1-year was above 40% AND its trailing 3-year was above 25% CAGR AND its trailing 5-year was also above 25% CAGR? In 1999.

How long did it last? 20 months.

How long did it take to reach back to 1999 levels? 8 years.

Now it's been true for the past 2 trading days. "Luckily", those conditions were met because of the correction that occurred in 2016, boosting the trailing 5-year as of today. But the trailing 7-year is pretty near 20% CAGR. We may be "safe" until the trailing 7-year reaches 25% CAGR. Also, VIX is still above 20, which is dangerous. VIX above 20 occurred from 1997 to 2003 and from 2008 to 2011.

NASDAQ holders better hope for a smooth correction in the upcoming months. Otherwise, 2021 could be a much more "interesting year" for NASDAQ than 2020... If it doesn't happen, 2022 will certainly be the crazy year.

S&P 500 still feels safe though, even if it will be slightly affected by a correction on NASDAQ.

 

[peterk]

However close we are, the probability that we're at the market peak is definitely lower than the probability of the next CMF Investing thread being hijacked by dividend lovers/haters...

 

[Ponderling]

We are getting close to a year since the big drop at the start of covid. I still read a version of the print layout of the Globe, and wonder how they are going to deal with the usual summary table of stocks that are trading at 52 week highs.

Soon almost every listed stock except maybe preffered shares will be all trading at 52 week highs.

Plus my scotia account research summary screen will be thrown off, as all will be trading at 52 week highs more or less for the next 11 or so months, unless the equity market has the floor drop out of it again.

 

[james4beach]

We are getting close to a year since the big drop at the start of covid. I still read a version of the print layout of the Globe, and wonder how they are going to deal with the usual summary table of stocks that are trading at 52 week highs.

Good point, nearing the crash anniversary. Here's a list of 1 year % change in a few things I like to track

XAW 13.45% (world stocks)
ZSP 13.10% (S&P 500 index)
CGL.C 10.59% (gold)
XIC 7.06% (TSX Composite)
XBB 3.73% (bonds)

An interesting year. Foreign stocks including emerging mkts are doing great. But really, just about all assets are up. Amazing to think that you could throw a couple darts at that "dartboard" of major assets and end up with a well performing portfolio.

A bit off topic, but look at how well PH&N Balanced Fund has been doing lately. I'm wondering how they got 13.23% in the last year, when the above asset class returns suggest something more like 7% to 9% would be expected after MER.

 

[MrBlackhill]

Good point, nearing the crash anniversary. Here's a list of 1 year % change in a few things I like to track

XAW 13.45% (world stocks)
ZSP 13.10% (S&P 500 index)
CGL.C 10.59% (gold)
XIC 7.06% (TSX Composite)
XBB 3.73% (bonds)

An interesting year. Foreign stocks including emerging mkts are doing great. But really, just about all assets are up. Amazing to think that you could throw a couple darts at that "dartboard" of major assets and end up with a well performing portfolio.

A bit off topic, but look at how well PH&N Balanced Fund has been doing lately. I'm wondering how they got 13.23% in the last year, when the above asset class returns suggest something more like 7% to 9% would be expected after MER.

Maybe 2020 simply divided the sectors. The sectors that profited the most of that context balanced out the hard-hit sectors.

Energy, REITs and financials are down. Obviously.
Tech, consumer discretionary, comm., materials and healthcare are up. Which all makes sense.
Industrials, utilities and consumer staples are in-between or business as usual.

I'm definitely no expert of all those sectors, but I think it all makes sense.

• Gold is up because it got a boost from the crash uncertainty and money printing
• Energy is down because of all the lockdowns, reducing transportation and traveling
• REITs are down because of all the lockdowns, period
• Tech and comm. are up because of everybody working from home and relying on tech and comm. and online entertainment
• Healthcare is up because of the pandemic
• Consumer discretionary is up because of e-commerce
• Industrials are mostly up because many are essential services, but airlines dragged the sector down
• Consumer staples are mostly essential services and it's mostly business as usual
• etc.

 

[MrBlackhill]

A bit off topic, but look at how well PH&N Balanced Fund has been doing lately. I'm wondering how they got 13.23% in the last year, when the above asset class returns suggest something more like 7% to 9% would be expected after MER.

The answer that no index investor wants to hear : great active portfolio management.

It holds 30% of RBC Global Equity Focus Fund O which has easily beaten MSCI World index in 2020 (and many other years). 23.8% vs 13.87% for the index or 11.66% for XWD.

 

[james4beach]

The answer that no index investor wants to hear : great active portfolio management.

It holds 30% of RBC Global Equity Focus Fund O which has easily beaten MSCI World index.

Wow interesting. So you found that this 'RBC Global Equity Focus Fund' was the outlier, vs the index?

So now all you have to do is successfully time your allocation of capital between RBC Global Equity Focus Fund and Mawer Canadian Equity, both of which (sometimes) beat the index. But you have to get the timing right!

It's worth noting that the PH&N fund has not always outperformed the index. At the moment though, I'm pretty impressed by what I see.

 

[MrBlackhill]

Wow interesting. So you found that this 'RBC Global Equity Focus Fund' was the outlier, vs the index?

So now all you have to do is successfully time your allocation of capital between RBC Global Equity Focus Fund and Mawer Canadian Equity, both of which (sometimes) beat the index. But you have to get the timing right!

It's worth noting that the PH&N fund has not always outperformed the index. At the moment though, I'm pretty impressed by what I see.

I didn't check on every holding, but the bond holding (25% of PH&N Bond Fund) has also easily beaten its index. Some other holdings underperformed, but have less weight.

The main outperformance is certainly due to RBC Global Equity Focus Fund O which has been a constant outperformer since inception in April 2014.

 

[james4beach]

The main outperformance is certainly due to RBC Global Equity Focus Fund

Interesting. It doesn't have a long history, but the idea of a skilled active manager is an intriguing concept (could just be random chance of course).

At first I thought that maybe they are tilted heavily towards tech, but that does not appear to be the case. They have a leaning towards growth & momentum, the same style which has served me well in the last few years.

Growth/momentum also tends to sharply drop when bull markets are exhausted, so it will be interesting to see how they navigate into a slowdown or bear market. I wonder (and worry) about the same thing with my own growth/momentum stocks.

It can be a rough time when such themes come to an end. It's really amazing how strong the bull market of the last few years has been.

 

[james4beach]

Regarding growth and momentum... I just took a peek at MTUM. While the S&P 500 is up 19% for the trailing year, MTUM is up 33% - just amazing!

Over 5 years, annual returns are
SPY 18.7%
MTUM 23.6% ... that's 4.9% CAGR better

Pretty wild. MTUM has successfully kept high exposure to momentum champs TSLA, AAPL, MSFT, etc.

Every couple years, I look at MTUM and say to myself, this is very neat but surely it's a bad idea to pile into momentum. And yet ...