Mike

I am always weary of dividend yield as a defining criteria. High yield are often a function of low stock price so you are buying a bond-like instrument (albeit with greater tax efficiency).

In a perfect world, I would like to see yields of 2-2.5% with increasing dividends every year.

* I should’ve delayed my post by one day!

* I’m not terribly familiar with Thomson, but based on preliminary work, Bloomberg appears to be eating market share away from both Reuters and Thomson.

Bloomberg: $2.8B –> $4.7B (on $1.5B operating profits)
Reuters: $3.6B –> $2.6B (on $0.256B operating profits)
Thomson: $7.4B –> $6.6B (on $1.2B operating profits)

* A study by David Dreman reviewed that the optimal strategy is to buy higher yielding stocks, but not the HIGHEST yielding stocks. 2.5% to 5.5% in today’s depressed market sounds reasonable.

Financial Jungle Guy- got a response for you next week on the dangers on high dividend yield. Stay tuned!

>>[i]”Financial Jungle Guy- got a response for you next week on the dangers on high dividend yield. Stay tuned!”[/i]

How about a few hints? Dividend coverage ratios? Lackluster growth profiles? Diversification?

Everyone, scomac is the jewel who introduced me to dividend investing back about 2 or 3 years ago. You can find more of his timeless guidance over at www.FinancialWebring.com and Forums.CanadianBusiness.com.

I smell an interview in the making. What do you say, scomac?

For income trusts, their distributions usually don’t grow as fast as dividends, but the ones I picked have above-average growth within the trust group.

Inside a registered account, yield and growth are interchangeable; you can reinvest the distributions to buy more units, thus grow the distributions that way. Take Consumers’ Waterheater for example. Its 8.8% distribution yield is expected to grow 6% annually. Between reinvesting the 8.8% yield and the 6% growth, your overall yield is expected to appreciate 8.8%+6% = 14.6% per year. This is no different than a low 2% yielding stock growing at 12.6% per year. Both are growing at approximately the same rate.

Thanks for following up on this (and sorry it’s taken me so long to read it & respond. I was in vacation mode ).

It looks like current stock prices are definitely creating an opportunity to build a high yielding portfolio. Like you, I’m taking advantage of this.

I don’t have a problem with income trusts but I do have a problem with including them in a dividend portfolio when you’re using tax efficiency as one of your selling points for a dividend portfolio. If you can throw in income trusts, why not throw in a couple of ETFs as well? Cap gains are more tax efficient than income distributions are they not? (I don’t own any income trusts outside of those in ETFs).

And then if you start adding RIM, Shoppers, etc., you might still be better off DCAing into ETFs.

Btw, I’d love to see a guest post by scomac. I always enjoy his comments at FWF and CB forums.

Depending on your province and your tax-bracket, unused dividend tax credits go wasted since they don’t carry into future years. If you’re going to lose them anyway, might as well get a free ride on income trusts. Personally, I take advantage of the tax deferral inside RRSP by hiding my trusts in there.

>>”If you can throw in income trusts, why not throw in a couple of ETFs as well? Cap gains are more tax efficient than income distributions are they not? (I don’t own any income trusts outside of those in ETFs).”

Not following. Are you suggesting income trust ETFs? My gut tells me that bad trusts outweigh good trusts, so I rather hand-pick them.

>>”Btw, I’d love to see a guest post by scomac. I always enjoy his comments at FWF and CB forums.”

I meant to prepare a list of questions for scomac over the weekend, but I forgot that I had a few prior engagements. Yes, I’m eager to pick his brain very soon. He’s steady and experienced. Best of all, he’s very open about his investment strategy around newbies like us.