How to Invest in Dividend Paying Stocks in Canada

How to invest in dividend paying stocks in Canada.

Today I’m excited to have Mark Seed on the show, who runs the popular Canadian blog, My Own Advisor. On the blog, Mark documents his journey and lessons learned as he invests towards achieving an early retirement, and works on growing his portfolio to 1 million dollars.

What’s very interesting about Mark, is that he is a hybrid investor meaning he doesn’t just invest in one particular way (for example, he doesn’t just buy the index with ETFs). Instead, he uses ETFs to hold US and international companies, but when it comes to the Canadian portion of his portfolio, he holds individual stocks of strong dividend paying companies instead of just holding a single ETF that captures all the major companies in Canada.

This is a bit of a different strategy than what I’ve been doing, so I thought it would be great to have Mark on the show to broaden our view by seeing how others invest, learn why he invests in that way (the pros and the cons), and see if maybe it’s a good fit for the way you invest.

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Questions Asked During the Interview:

  1. What made you decide to be a hybrid investor instead of just sticking with index investing or just dividend investing?
  2. What is your process you take for selecting which dividend paying companies to buy?
  3. Once you’ve done your due diligence on the company, what analysis do you do to determine whether now is the right time to buy? For example, how do you decide whether a company is currently overvalued or undervalued?
  4. How do you deal with the risk that you are investing in individual companies? As opposed to hundreds or thousands of companies through an ETF. For example, let’s say you’re holding CIBC. How do you deal with the worry that something might happen at that particular company and it could potentially never recover back to its previous stock price? (ex. Nortel, Blackberry)
  5. What made you choose to buy individual dividend paying companies vs buying something like the aristocrat ETF?
  6. Once you choose to retire, how do you plan on changing your asset allocation, if at all? (i.e. Going from an asset accumulation stage, to an asset decumulation phase).
    1. What if you retired early?
    2. What if you did a traditional retirement where CPP, OAS, and your pensions kick-in right away (or almost right away).
  7. If you did a much earlier retirement where CPP and OAS don’t kick-in yet, would you move all or most of your investments to stable Canadian dividend payers partially due to the dividend tax credit?
  8. Speaking of asset allocation, what are your thoughts about using bonds as part of your portfolio, especially in retirement? Many Canadians are feeling reluctant to use them due to their low returns, and are expecting their prices to drop due to their fear of rising interest rates here in Canada. What’s your take on this?
  9. A common criticism against the Canadian index is that we as Canada are too concentrated in just a few sectors (i.e. energy, financials, materials). I imagine you run into the same challenge with Canadian dividend investing. Do you do anything to offset this in your portfolio? Have you come across any good solutions?
  10. Do you have any other advice for dividend focused investors? (or investors in general)
  11. Tell us more about My Own Advisor and what’s the best way to hear more from you?