Dividend Investing

What are dividends?

Dividends are payments to shareholders by companies in the form of cash or its equivalent determined by the company's board of directors. You can think of this as interest payment to people who are holding shares within the company. When we talk about dividend-paying companies, these tend to be bluechip companies that are well established.

Dividend Aristocrats (Canada)

In order to qualify as a Dividend Aristocrat in Canada, the company must have:

1. Maintained or increased dividends for 5 consecutive years

2. Must have at least a Market Cap of $300 million

3. Listed on the TSX and be a member of the S&P Canada BMI

4. For new additions on the aristocrat list, the company must have increased their dividend in the first year of the prior five years

Understanding the Spreadsheet

Market Cap - Determines how large a company is valued at based on the share price.

P/E ratio - P/E ratio or price to earnings ratio is the valuation of the company based on their stock price relative to their earnings.

Yield - This is the percentage of dividend that you will receive per share. For example, ENB.TO yields 7.16 which translates to $3.24 per share per year. We recommend aiming for around 4% when looking at dividend-paying stocks.

Payout Ratio - This is the percentage of profits being paid out to shareholders. For example, RY has a Payout Ratio of approximately 53% which means 53% of their annual earnings is paid out to shareholders.

List of Canadian dividend Aristocrats (Last updated September 2021):

*CHP.UN Removed as of September 2021

When structuring your core holdings, we suggesting picking several industries to focus your stock picks on. (Note: Financials and energy are strongest in Canada). Keep in mind that most of the companies are on quarterly payment schedules.

How do I know if I qualify for a dividend?

Important dates to keep in mind:

1. Announcement date

The announcement date is when a stock's dividend amount is determined and announced to the shareholders.

2. Ex-Dividend Date

You MUST buy the stock before this date in order to qualify for the payment. To find this date, a simple google search of the company will bring up the date. If you buy after the date, you will not qualify for the dividend payout.

3. Record Date

This is the cut-off date in which the company determines which shareholders may receive dividends.

4. Payment Date

This is when you will receive the dividend payout. Be sure to give your broker a few business days for the payment to settle in your account.

What's the point in buying dividend stocks?

The point of adding dividend-paying stocks even if the stock price itself is not volatile is so that you can have passive income. Over time, the power of compounding will take place which would result in exponential growth. This process requires time. Dividend-paying companies, especially dividend aristocrats, are typically very strong companies in their sectors and will be around for the time being unless there is a sudden industry shakeup or severe economic disaster.

Track your dividends - We strongly recommend this free dividend tracking website. This website will help you organize your dividend stocks as well as what your yearly payout will be.