What is a Dividend?

  • When a company pays out a portion of its earnings to shareholders
  • Dividends are typically paid on a periodic basis (monthly, quarterly, semi-annual, annual)

Why Invest for Dividends?

  • Tax-Efficiency - Canadian dividends receive Dividend Tax Credit (vs. 100% taxation on interest income)
  • Growing Stream of Income Many dividend paying stocks regularly increase their dividend payments allowing for higher year-over-year investment income or attractive compounding when reinvested in your portfolio. This helps protect against increasing lifestyle expenses, longer lifespans and portfolio volatility
  • Growth In addition to providing income, dividend stocks can also appreciate in value over time

How to Invest for Dividends - it's not just about yield!

  • Historical Track Record - Consecutive years of uninterrupted dividend payments and increases
  • Ability to Maintain Current Dividend - Payout ratio (dividend/earnings) and free cash flow
  • Ability to Grow Future Dividends - Positive business and operating profile outlook
  • Commitment by Management to Dividend - Management guidance for future dividend increases
  • Valuation - Seek attractive entry points relative to other investment opportunities
  • Yield - Once criteria 1 to 5 have been evaluated, determine the highest yielding stocks