The top retail investing story of the ten years following the global financial crisis has to be the rise of dividend stocks. Dividend-payers have had some ups and downs over that period, but they offered familiarity, stability and steady returns that were supported by their quarterly cash payouts. What more could you want if you’re part of this country’s huge boomer demographic and looking just ahead to retirement?
Here’s something – bear-market protection. For a bunch of reasons, investors have started to view dividend stocks as something of a haven from stock market turbulence. A reality check on whether dividend stocks provide bear market protection was recently done by Dan Hallett, vice-president at Highview Financial Group and one of the most astute and frank observers of the Canadian investing scene.
His conclusion was that dividend stocks offer no special bear-market protection. One time when dividend stocks did outperform was the 2000 bear market, but that was because the market decline focused on technology stocks and was not as broad-based as other market pullbacks.
Dividend stocks are a great option for investors, particularly dividend growth stocks that increase their cash payouts year by year. Share prices may be volatile, but dividends arrive every quarter. They’re a tangible return that can’t be taken away from you once paid.
But don’t expect more from dividend stocks than they can deliver. Diversification through bonds is what protects a portfolio in a downturn, not holdings in blue-chip dividend stocks.
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Rob’s personal finance reading list…
15 U.S. dividend kings
A list of U.S.-listed stocks with a record of dividend growth going back to the late 1960s. Canada has some similar stocks, but long-term dividend growth is more commonly found in the U.S. market.
Eight fridge habits that cost you money
Just as you thought … opening your fridge too much will cost you. So will both overfilling and underfilling a fridge.
For parents helping to support adult kids
An advice columnist tackles a question from a 29-year-old who vents about parental support of two older siblings. This millennial is a bit resentful about not receiving similar help but also wonders whether the parents can afford all the financial assistance they’re providing.
Car accidents and your insurance costs
Good info here on what happens when you make a claim on your car insurance for accidents where you’re at fault and not at fault. Be sure to check out the part about a common insurance policy feature called accident forgiveness. Your insurer may “forgive” an accident in terms of not raising your premium, but the accident remains on your record.
Ask Rob
Q: My investment adviser has me invested in an number of different mutual funds, both equity and bond funds. I would like to compare the return of these against their benchmarks and alternative ETFs. But how do I include all dividends in my comparative returns?
A: The practice in the mutual fund and ETF businesses is to report returns on a total-return basis, which means that both changes in unit price and dividends are considered. For the most accurate comparisons, use the S&P/TSX composite total return index when assessing Canadian equity mutual funds and ETFs.
Do you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length and clarity.
Today’s financial tool
Members of the Financial Wisdom Forum have a go at helping someone who wants to dump a full-service investment adviser and go the DIY route. Good practical points raised here.
Video of the week
What people in common-law marriages need to know about division of property if they separate. The solution might be a cohabitation agreement.
What I’ve been writing about
- Six ways the Liberal election win will change your family finances
- The give and take of reverse mortgages: Cash in your hands while your home equity gets eaten way
- How to pick the right fee-for-service financial planner (for Globe Unlimited subscribers)
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Rob Carrick