Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(}function setPanelState(o){dom.root.classList[o?"add":"remove"](,dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

I’ve come into some wealth recently and have calculated that I can easily live off of dividends. However, I am concerned about a big market downturn affecting dividend payouts. Do you find that dividends get cut substantially during bear markets (such as 2008-09) or are most blue-chip Canadian companies strong enough to withstand severe slumps without chopping dividends substantially?

You can minimize the risk of dividend cuts in your portfolio by investing in strong, stable businesses with a history of raising – not reducing – their dividends. However, you can’t eliminate the risk entirely.

During the financial crisis in 2009, for example, insurer Manulife Financial Corp. (MFC) surprised many investors by cutting its dividend in half. Since then, we’ve seen dividend reductions from companies including power producer TransAlta Corp. (TA), mutual fund provider AGF Management Ltd. (AGF.B), broadcaster Corus Entertainment Inc. (CJR.B) and a long list of oil and gas producers. Resource stocks are especially prone to dividend cuts because their fortunes rise and fall with commodity prices that are beyond their control.

Story continues below advertisement

Even companies that were once seen as rocks of stability can slash their payouts; in the United States, the poster child is General Electric Co., which took a knife to its dividend in 2009 and then again in 2017 and 2018 as some of its businesses got into trouble.

The good news is that dividend cuts are still relatively rare, especially for well-established companies that have a strong competitive position. Among Canada’s major banks, for example, the last of the Big Six to cut its dividend was National Bank of Canada and that was back in 1992. Most of the other big banks have paid stable or growing dividends for well over a century, although during the financial crisis Bank of Montreal’s yield soared into the double digits, raising fears – which turned out to be unfounded – that it would cut its payout.

Even as banks put dividend increases on hold for several years after the crisis to rebuild their balance sheets, many other Canadian companies – Enbridge Inc. (ENB), TC Energy Corp. (TRP) and Fortis Inc. (FTS), to name just a few – continued to hike their payments annually. In the U.S., dividend growth stalwarts such as Procter & Gamble Co. (PG), Johnson & Johnson (JNJ) and Coca-Cola Co. (KO), among dozens of others, also continued to hike their dividends.

The lesson here is that if you want to generate a reliable stream of dividend income, you should focus on quality and diversify across companies and sectors to control your risk. If you lack the knowledge or time to manage a portfolio of individual dividend stocks, consider investing in dividend exchange-traded funds or broadly diversified index ETFs. The more diversified you are, the less impact a dividend cut will have on your cash flow. Also, be wary of stocks with very high yields, which can be a sign of a looming dividend cut, as happened with Corus, AGF and others. (For examples of stocks with yields, I consider sustainable, see my model Yield Hog Dividend Growth Portfolio at

Finally, devoting a portion of your portfolio to cash, bonds or guaranteed investment certificates will also help to control your risk. Some investors are okay with having 100-per-cent exposure to equities, but for most of us, putting a chunk of our capital in fixed-income investments will help to smooth the ride if markets hit a pothole.

I am trying to manage the equities mix in my portfolio based on sector. My holdings include Brookfield Asset Management Inc. (BAM.A) and Brookfield Renewable Partners LP (BEP.UN). I assume the latter is a utility but what sector does Brookfield Asset Management fall under?

As an asset manager, BAM is included in the financials sector under the GICS (Global Industry Classification Standard) system. Brookfield Renewable and fellow BAM subsidiary Brookfield Infrastructure Partners LP (BIP.UN) are both classified as utilities. Brookfield Property Partners LP (BPY.UN) falls under real estate and Brookfield Business Partners LLP (BBU.UN) is classified as an industrial. Tip: To find the GICS classification of any stock in the S&P/TSX Composite Index, look up the holdings of the iShares Core S&P/TSX Capped Composite Index ETF (XIC). The list includes the GICS sector for each constituent.

Story continues below advertisement

We receive dividend income primarily from Canadian preferred shares, which benefit from the dividend tax credit (DTC). We are thinking of gravitating toward ETFs and two we are considering are ZDH and ZPW. Do these ETF qualify for the DTC?

No. The BMO International Dividend Hedged to CAD ETF (ZDH) invests in dividend stocks domiciled outside North America, while the BMO US Put Write ETF (ZPW) generates income by writing put options on a portfolio of U.S. large-cap stocks. Because these ETFs do not invest in Canadian dividend-paying stocks, they do not qualify for the DTC.

A quick way to determine whether a particular ETF benefits from the DTC is to look up the annual tax treatment of its distributions. With BMO ETFs, for example, this information is provided under the “Tax and Distributions” tab on the web page for each ETF. For both ZDH and ZPW, the amount listed under “eligible dividends” for 2018 is zero. (Note: You must choose a year in the drop-down box and then scroll down to see the annual summary and eligible dividend amount, if any.)

E-mail your questions to

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies