December 2024

A Time For Reflection

Rob Carrick from the Globe and Mail recently published an article about GICs maturing and what one should do with the money. He mentions putting the money into bonds, dividend stocks or cash equivalents. I was happy to see that dividend stocks were mentioned for a change and I think they would provide the best outcome given the other two choices.

Rob acknowledges at the end of the article that his GICs are coming due and he won’t be buying any more given the decline in interest rates. Unfortunately, he doesn’t go into detail on what he will be doing with the money but I can only assume the money will be put into one of the three options he mentions in the article.

Dividend stocks would be my choice out of the three if someone asked. I’ve never been a fan of GICs, having only owned one for about a year when I was in my 20’s. It was the typical bank persuasion and me not wanting to lose any money. I didn’t lose money but I did lose time. Time that could have been spent earning dividends, purchasing more shares and growing that small amount significantly more than what I did by earning interest. That was my one and only GIC. Since then, I’ve been fully invested in dividend paying stocks.

I understand the desire to diversify a portfolio and the influence the media and financial planners have over us on how important diversification is, but I have only ever been 100% invested in individual dividend stocks. My companies are diverse, but what makes up my portfolio is not.

This would worry many people I’m sure. It could also cause great stress for my fellow retirees being only invested in individual companies compared to the typical 60/40 portfolio split with bonds being added in for good measure. I can see how my portfolio could cause undue panic but I invest to make money plain and simple.

A lot of people get caught up in the hype and the media does a very good job at promoting stocks that are flashy, encouraging young (and old) investors to invest in the high flyers. I mean look at the S&P 500 this year thanks to the Magnificent 7 (namely Nvidia). They have had a terrific run and perhaps will for the foreseeable future. What people don’t take time to consider, however, is the regular, every day companies that can do just as well.

Let’s look at a few below, and I’ll start with the U.S. tech that has received a lot of coverage this year:

YTD Total Return (Jan 1 - Nov 29th):

Nvidia 187.07%

META 66.28%

Tesla 38.94%

Amazon 38.66%

Apple 28.38%

Google 22.45%

Microsoft 15.01%

Not bad at all, with Nvidia clearly having a fantastic year.

But how do those compare with some of the boring companies up here in the North? Take a look:

CES Solutions 183.43%

Aecon 121.84%

Manulife 60.38%

Extendicare 54.04%

Peyto Exploration 48.17%

Royal Bank 35.69%

Arc Resources 34.35%

Enbridge 32.82%

Bank of Nova Scotia 32.78%

There are countless others that could be added to both the U.S. and Canadian lists, the point is, many people focus only on the stocks that are continually being pumped by the media but there are so many others that if purchased at the right time can do remarkably well for you. It’s finding the stocks that are downtrodden, that is the key.

I wish every holding in my portfolio had performed as well. Some didn't, but imagine earning only 5% on a GIC over the past year. Not good.

Today, an investor has a variety of choices when picking a dividend paying stock with a yield of at least 5%. That doesn’t take into account any price appreciation that can occur. Sure, the price might go down and the stock market could crash. But what if it doesn’t? Or what if it does go down, but then comes back up again?

That’s the fun of the stock market. The hope we all have is it will go back up again. Historically, that has been the case. No one can predict the future, but I would certainly put my money on a dividend paying stock, any day of the week, over a GIC.

How about you?

Our November Dividend Income

This month our portfolio provided us with $2,400 in dividend income. It may not sound like a lot compared to last month but this is actually a 56% increase over last November.

We earned dividends from the following companies: