I am Canadian. I wear touques, say exuse me to everything and thank people for thanking me. I also buy Canadian dividend stocks. Granted, there are not as many Canadian dividend growth stocks as there are in the U.S. but they are out there. [ad#tdg-embedded]
Why I Own Canadian Dividend Stock
As I said, I am a Canadian and I will more than likely retire on Canada. As such, my future income requirements will be in Canadian dollars and it makes sense to generate some of that income in Canadian dollars.
A second reason is that there is no withholding taxes with Canadian stocks as there are with global stocks. If you hold a US dividend stock outside of an RSP then you are required to pay 15% of that dividend to the IRS (your broker does this on your behalf).
Why Not All Canadian Dividend Stocks
Canada’s stock market makes up about 3% of the global markets. This is not much at all. If I only invested in Canadian stocks then I would be missing out on large growth opportunities as well as the numerous, and high quality, global dividend stocks.
Another key reason is that only investing in Canada is no diversified. Just as a US investor should not only buy American, a Canadian should look outside of the four walls of the country to reduce the risk.
Canadian Dividend Aristocrats
Like our neighbours to the south, we have a Dividend Aristocrat list that is compiled of companies that have increased dividends for at least 7 years (much less than the US index).
However, a couple of things should be mentioned. Although it is a good place to start looking for investment prospects, the list is smalller and holds a lot of banks and income trusts. Nothing wrong with banks, you just want to ensure you diversify away from banks as well.
Income trusts on the other hand are not your typical company and need to be analysed differently than a “normal” company. I have not personally gone down that path. My suggestion for people looking at income trusts is consider an ETF focused on that subset of the market.
My Recent Purchases
In the past month, I made a couple of additional Canadian dividend stock buys.
The first was dividend growth stock Canadian Pacific Rail (cp.to). One of Canada’s big railroad stocks, it has shown good growth of earnings and a positive dividend growth record.
The second dividend stock was long-time Canadian dividend favourite TransCanada Pipelines (trp.to) which is one of Canada’s longest standing dividend stocks. I have been watching his one for a while and finally found a place for it in my portfolio.
The third stock is not a dividend growth stock, but does pay a good dividend. If you have been reading my blog in the past you may recognize that I owned it once before. The company is BCE Inc. (bce.to) and it’s high dividend and recent strong performance moved me to act. This will not be a long term hold for me, but I am going to collect the dividend while I hope for the stock price to rise.
Good Day Eh!
Even if you are not from Canada, there are some dividend growth stocks to consider. CP an TRP are two, as are banking big Royal Bank of Canada or oil and gas player Encana. They could provide some diversification an some extra income too.
CN Rail has demonstrated better Dividend Growth than CP Rail.
Thanks for this – I will have to look at BCE as a possibility. I also like CP. I have several Canadian dividend stocks in my portfolio (Royal Bank, Toronto Dominion Bank, Candian National Railway and Sun Life). I have done well with these, but as I am in the US, we get hit with the 15% tax the other way. Just recently, the last two quarters, I have been able to reinvest the dividends, an option that wasn’t available before. Have though of BNS, and BMO, also, but don’t want to be too bank-heavy.
PS – I had to Google what a touque is.
Awesome thread.
I love it how you mention the withholding tax, as a lot of Canadian investors are not cognizant of this factor as it relates to their investments.
I like your 3 Canadian stock picks. I also have positions in TRP and BCE but not with Canadian Pacific Rail.
My goal is to eventually increase my foreign content as it relates to my portfolio. What do you perceive to be the appropriate percentage of non-Canadian/foreign content in one’s portfolio?
Cheers,
The Rat
Actually, I just read over your Asset Allocation thread…it seems like it’s just over 50% right? That’s some pretty solid diversification if you ask me. I’m nowhere near that kind of diversification. Good stuff.
I have BCE as well, it’s been having a strong run. I may buy more on a correction.
well first of all i am visiting your blog for first time.But really sayin g your content and design of blog is really good.Your three dividend stocks are good.