Dale Roberts

Long-term horizon, portfolio strategy, bonds, dividend investing
Dale Roberts
Long-term horizon, portfolio strategy, bonds, dividend investing
Contributor since: 2012
Company: Tangerine Bank
Hi Eric, wondering why you left out of many other bear markets that had quick corrections such as the 1962 correction that was over in several months? Looks like 1.5 years might be an median area.
If we have started the next correction than perhaps we are over 1.3 of the way through?
That said, no one knows what the stock or bond markets will do. To give advice or trade on speculation is probably not useful.
Bond yields have and can stay low and range bound for decades. No one knows what stock and bond markets will do. We know stocks have gone up consistently over longer periods. Bonds have delivered over long periods.
Hi William thanks for the article. I don't think you supported why there will be a major collapse? I have no idea what will happen, as does no one here writing or reading.
But in any real market correction (and especially a real bear market) there is a cause. We had the tech bubble the US mortgage / housing stupidity /fraud. We have the energy induced bear market in Canada.
What would make US stocks fall so hard? Recession? Higher rates? Investor fear? Terrible earnings? Just because? ;)
Thanks, Dale
The dividend health screen from Vanguard on the Dividend Achievers Index removed XOM and CVX from the index.
Of course these are not companies one would buy if they were looking for dividend 'safety'. Safer dividends come from earnings not from borrowing and selling assets and cutting cap ex that are required to fund future earnings and dividends. Though it's certainly possible that even if oil stays in the $30-50 range for many years (as predicted) the companies could continue to find creative ways to pay the dividends.
There must be an easier way to make a living off of dividends :) That said, should one ever question an Aristocrat?
But it can get a little more 'complicated'. The single cow analogy does not exist in the company ownership world. A company is more like a dairy farm, the farmer the CEO. A dairy cow must be milked.
A farmer can choose to give some milk profits to shareholders and keep a lot of the milk profits to purchase more dairy cows. The dairy farm is now producing more milk, and perhaps the farmer knows how to produce and purchase even more productive cows.
The farm is producing even more milk. The value of the farm has increased greatly. Now the shareholder might have to sell a portion of farm ownership to turn that success into cash.
But what is safer or more successful for a business owner/shareholder?
In the end it surely comes down to the success of the milk production.
That saga continues. One year ago I wrote this article asking when or will the oil majors cut dividends ...
At the time, many popular authors thought the oils were the opportunity of a lifetime. Some of those authors were even writing for retirees. There was no analysis (basic understanding) of the industry of the company's prospects in the new low oil price paradigm.
This article is an interesting snapshot / overview.
Investors should invest within their risk tolerance level, and understand what they are investing in - sector and specific company risk.
Dividends are simple and they're not. With respect to dividends and potential reinvestment ...
"Shareholders like optionality and the payment of a dividend gives the shareholder the option to increase or decrease their exposure to that entity across time".
If one chooses to not reinvest the dividends into the same profit centre, they are not decreasing their company ownership, but they have the option of increasing their ownership of the profit centre and dividends that have the potential to grow even further. The magic of compounding.
They say a cow for her milk. A stock for its dividends. Using that analogy, when I receive that milk (cash) and if I choose not to buy more cows, the existing cow is still there producing the same amount of milk. I have not decreased my ownership in that cow.
But I have the option of buying a greater percentage of that cow and her milk (cash).
Hi, I do report my personal portfolio returns and trends for what it's worth. :)
I have highlighted my journey to dividend growth investing.
Hi market great link, thanks. The dividend aristocrat index would have outperformed that investor (who certainly exhibited the ability to beat the total market)?
Once again, likely best not to guess, too much. If you have Canadian, US and International exposure 'they' say to not currency hedge. It's more about your asset allocation and buying the companies or indices that you need to reach your goals.
We've had a nice currency boost and that may continue or not. Should we sell the JNJ's and KO's and PEP's and Walmart's and Apples and Microsoft's because we're worried about the currency? A weaker US dollar will help those companies' international earnings.
If the Canadian dollar strengthens, well your Canuck bucks can buy more US shares.
One year ago I asked the question "When or will the oil major cut dividends?"
Here's the article ...
At the time some very popular SA authors (for retirees none the less) were writing that buying the oils was the "opportunity of a lifetime".
It was obvious that there was much stress to come, and that's a normal part of investing, and that's when an investor has to be resilient and stay the course
It was obvious many were recommending a sector and companies that they did not know how to evaluate. Warren Buffet writes risk is not knowing what you're doing.
I am largely not a stock picker, but the COP situation was obvious - if oil prices were to stay below $50 and $40. What's surprising is how fast this happened. Maybe we're only in the 2 inning of the new low oil price paradigm? Perhaps oil stays very low for a decade or more, who knows?
But perhaps an investor should evaluate a company and the earnings potential for a longer and lower oil price environment, just in case.
Chevron appears to be very stressed as well. How does Chevron fair over the next several years IF oil stays 30, 40, 50ish? Will we be writing about Chevron and dividend holds or cuts in 1 or 2 years? Is the company built for lower oil prices? Is Exxon, is Suncor?
Hey 675, that is a wonderful fund for those who want a higher yield, and it certainly holds many of the usual suspects. Yes one could make the life stage portfolio switch in about a minute.
The yield would almost eliminate any sequence of returns risk for a retiree who wants to spend at 4%, inflation adjusted, assuming there is no major portfolio income disruption.
The Fund also has a financial health screen.
Being one who skimmed 15 top large cap Dividend Achievers, your top 10 comment is interesting. My research on the top 10 of Achievers suggested there was some value in moving to top 15 or top 20 holdings. That's in line with studies that suggest the 14-18 holdings range.
Or as you write one can use if for individual holding ideas or for some 'assurance' from the financial health screen.
Great article Adam. It can be very advantageous for investors to understand the difference between income investing and dividend growth investing in the traditional sense of compounding for greater total return.
There is a different prescription. According to a few studies the key to the total return approach is largely a meaningful dividend growth history and low payout ratio (see HON). From there it may come down to simple and consistent execution; in The Simple Best Investment Lowell Miller probably uses the word "passive" more than any other adjective.
It's a simple strategy for the non sophisticated investor, but many will complicate the matter and also get very 'active'. The passive strategy and the self directed stock picker (active) appear to be at cross purposes.
In the end it's about investor behaviour and execution. The sloth will likely win this kind of race. :)
Hi as, the big Canadian banks in my book with be dividend royalty and beyond (Dividend Kings with an extra gold star or two).
The Great Recession was a financial crisis and these financial companies held up quite well and simply maintained dividends and then went back to increasing them. They almost exclusively avoided all of the fantasy US mortgage synthetic silliness.
That's not to say low oil prices, commodity prices and a housing bust might not put them under pressure. That said, they've seen all of that before of the last 100 years or more of paying dividends.
Every market correction has its unique roots.
Very comfortable working for and investing in a big Canadian banks.
We had a federal surplus last month. We're good for a bit. Housing prices up another 12% :)
Still true in terms of market share direction. Apple gaining vs android. That's the fact I was looking to point out :)
OK but ironically happy to be buying my Canadian dividend payers near 5% yield. Happy accident. But that will only be successful if the Canadian banks and telco's and pipelines continue to create generous profits over the longer term.
Dividend Growth companies appear to have that wonderful ability to beat the broad large cap indices, and do so with lower volatility. Better risk adjusted returns, what's not to like?
I am not seduced by the dividends (thought they do catch your eye) as it appears the way to the greatest total return within the dividend growth space might largely be yield agnostic. That said, if you can get a decent higher yielder with that low payout ratio, it might deliver in spades. But that's a tricky combination to find today - one that would fit the Lowell Miller model.
The best returning aristocrat from 1989 (one of only 7 survivors) Lowe's has the greatest total return of the group (exponentially), but has a very puny dividend. Most investors might ignore (the best performing aristocrat of all time?) because it has a 1.5% yield.
I am happy to hold Lowe's who just bought Canadian retailer Rona. Happy to hold Nike, and CVS and WBA, MMM, MDT, and a few other low yielding Achievers that will likely be my greatest total return machines.
Total return comes back to a single number - the share price. It's the number of shares you hold and that share price. The share price is largely driven by earnings and the markets' interpretation of earnings potential. The earnings are the main component, in the end.
Like Mr. Miller I like dividend growth for the divining rod that finds incredible earnings power and financial stability and shareholder friendly management.
I am certainly happy to hold some generous dividend payers as well. But I know that my success in regards to total return will mostly be determined by the earnings, not the dividends paid and reinvested.
The earnings drive the dividend and the share price.
This Canuck who owns Rona says awesome, eh? How will they convert dem Quebec dollars?
A little common sense could create a period of enormous and prolific economic growth. In fact, the growth would be too robust.
And it would have to be done slow to send many of the accountants home and most at the IRS and other gov't agents home (over time).
If we can avoid the tipping point (fear induced recession) we may see the benefits of one of the biggest wealth transfers in history. We could enter a busy vehicle sales and summer driving period in North America. Imagine if gov'ts also cut waste and then taxes.
Imagine if the US also ripped up the personal and business tax code (move to sensible flat taxes) and created an immediate 20-30% efficiency boost. ha.
But who knows?
As David Rosenberg will point out, US consumer spending is showing decent growth. Here's a chart ...
In Canada we just had a 10% increase in vehicles sales for January.
And Lowe's buys Rona in Canada. Now there's some currency exposure.
Canadians start to spend their dollars, win. Oil and commodity prices increase and Canadian dollar strengthens, currency boost for Lowe's earnings. Well that's the plan, anyway.
The tax break (low oil and nat gas prices) will likely eventually move into economies in a meaningful way. It's a massive potential shift of trillions of dollars.
That money has to go somewhere. Canadians are saving it, but eventually ...
Canada reports vehicle sales for January up 10%. Article did not state yoy or monthly.
That's a surprise for this Canadian, who happens to own Lowe's. Lowe's went shopping with some inflated US dollars. It certainly provides some currency exposure or risk. But if the US dollar bottoms and Canadian dollar strengthens Lowe's will get a nice currency boost on earnings.
If oil and commodities recover (Canadian economy) Lowe's will get that benefit and the number of stores acquired is significant.
Interesting move. Lowe's is already in Canada of course.
Panic is in the hands of the investor; they control the buy and sell buttons in the end.
That's a great list to look at. Yet Lowe's alone if left alone to run (no rebalancing) could have a carried a portfolio all alone.
Shocking performance. No need to evaluate the Aristocrats IMHO. Royalty does not have to pass through security.
Paul, I did not write in terms of market cap. :)
The royalties might be in owning those companies for the long haul :)
They said the movie theater business would go away. Not.
People like the experience.
Hi Mike VDIGX currently holds 49 companies. Many of your 50 holdings in there, just as I have many from the Vanguard fund and the Mike 50.
The returns will likely be very close, IMHO just as VDIGX is very close to the Aristocrats in returns. It doesn't take much to replicate a large cap index. An investor's success will likely come down to the ability to buy and hold and add and largely/almost exclusively be passive as per the Lowell Milller's of the world.
Rich, agreed. My neighbour also has a property there. He and his family love it. We go to the area as well. Great winery tours and more.