Being asked the question on how I did last year, I started to look at the TSX performance and was surprised to see the that the TSX was only up by 2.95% and 2.63% per year over the past 15 and 10 year periods. It was up some 6.03% per year over the past 5 years. I have data going back to 1956 on the TSX and I believe that was the start date for the TSX. The TSX is up by 5.50% per year since 1956.
As I understand it, dividends add about 2% per year over the long term to the TSX Index. So, even with dividends included the TSX is only up 4.95% and 4.63% per year over the past 15 and 10 year periods. It would be up 8.03% per year over the past 5 years. And up by 7.50% per year since 1956. What I like to see on my investments is long term increase per year of at least 8% per year. I am looking at a combined return of both capital gains and dividends in my 8% per year total return.
I seldom look at what the stock market is doing and only occasionally look at the TSX. I belong to some investment clubs, but they mostly look at the US markets rather than the Canadian markets. This is why I was surprised to see the long term results of the TSX. I do look at how I am doing and I am especially interested in any change in the dividend income I am receiving.
With my portfolio, it is up by 5.49% and 6.30% per year over the past 15 and 10 years. It is up by 6.40% per year over the past 5 years. My total return (which includes income and what I took out of my portfolio over the past 5 and 10 years is 9.48% and 9.43% per year. I have not calculated for a 15 year period because it is a lot more complex that just looking at portfolio increases. I am taking out around 3% of my portfolio each year currently, but took more out in the past.
My dividends income increased last year by 4.45% and I had a 5 year average increase of 5.08% per year. Last year was rather a tough year for dividends as some suspended dividends and other cut them. However, there were also some dividend increases.
The TSX has a lot of resource stocks and I have less than 1% in resource stocks. It is probably because of the resource stocks, like Oil and Gas, is why I did better than the TSX. I also mostly go for Dividend Growth Stocks.
It is quite easy to do what I do. Buy some good Canadian stock that pays dividends and especially ones that increase their dividends over time. You can just Google “dividend aristocrats index Canada” and you will get lots of hits. The link to the stocks on this index is here. The blogger of Dividend Growth Investing and Retirement has great spreadsheets on these sorts of stocks. Another great source is Money Sense’s Top 100 dividend stocks that they put out each year. The list for 2021 is on the Money Sense site.
The blogger Dividend Earner gives lots of information on these stocks and includes the Payout Ratio. Payout Ratio is important as you want to be sure that companies you invest in can actually pay the dividends that they pay, especially over the long term. Stay away from resource stocks.
Try to pay a reasonable price. This is much harder to figure out. Analyst’s recommendations are generally not helpful at all. Most Analysts’ recommendations consensuses are a Buy. I compare the current dividend yield to the 10 year median and historical median yields. The closes you can get to this information is to look for the stock on Morningstar. If you click the dividend tag you get the current trailing dividend yield and 5 year trailing dividend yield average. So basically, you want the current dividend yield to be at or higher than the 5 year average dividend yield.
On my other blog I wrote today about RioCan Real Estate (TSX-REI.UN, OTC-RIOCF) ... learn more. Next, I will write about H & R Real Estate Trust (TSX-HR.UN, OTC-HRUFF) ... learn more on Wednesday, March 17, 2021 around 5 pm.
This blog is meant for educational purposes only and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
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