The Canadian Investor - 10 Dividend Stocks with Increasing Yields

Episode Date: October 3, 2022

With the current bear market, most dividend paying stocks have increasing dividend yields which is great for income seekers. We go over 10 dividend stocks that have seen their yields increase significantly in the past year. We then go over factoring probabilities when investing. We finish the episode by talking about adding to existing positions vs. starting new ones. Tickers of stocks discussed: BAM-A.TO, RY.TO, CNQ.TO, TD.TO, EQIX, O, MSFT, T.TO, CTC-A.TO, GRT-UN.TO Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Sign up to Stratosphere for free 🚀 our platform for self-directed stock investing research. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

Welcome back into the show. This is the Canadian Investor Podcast, made possible by our friends and show sponsor, EQ Bank, which helps Canadians make bank with high interest and no fees on everyday banking. We also love their savings and investment products like GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs on a regular basis to set money aside for personal income taxes in April of every year. Their GICs are perfect because the interest rate is guaranteed, and I know I won't be able to touch that money until I need it for tax time. Whether you're looking to set some money aside for a rainy day or a big purchase is

coming through the pipeline or simply want to lower the risk of your overall investment portfolio, EQ Bank's GICs are a great option. The best thing about EQ Bank is that it is so easy to use. You can open an account and buy a GIC online in minutes. Take advantage of some of the best rates on the market today at eqbank.ca forward slash GIC. Again, eqbank.ca forward slash GIC. This is the Canadian Investor, where you take control of your own portfolio and gain the confidence you need to succeed in the markets. Hosted by Brayden Dennis and Simon Belanger. The Canadian Investor Podcast. Today is September 28th, 2022. My name is Brayden Dennis, as always joined by the legend himself, Simon Belanger. We are talking mental frameworks today. You guys know how I like to go off on some extremely strange tangent, bring it all the way back around to investing.

Simone, you're going to talk about dividend income portfolio and the people love that. This will be good. How are you feeling this morning, buddy? Yeah, pretty good. Pretty good. Had like a solid six, seven hours of sleep, which is gold when you have a newborn. So feeling pretty good. Dude, that's good. Yeah. She's been doing well. She's been improving, you know, four hours stretch.

So can't complain. Probably as much as I was getting before we had her anyways. Nice. Yeah, there you go. I feel I'm a little nervous right now because I'm a little excited. I can't give all the details right now. I'll share the details on the podcast at some point, but I feel like I'm about to play in a very important sports game. That's the level of the tingles on my back because I just became a millionaire, buddy.

Literally within the last hour. Very paper. I can't share any details, but that was my goal before the age of 30 and I smashed that. So, Simone, let's talk about World War II, their planes, and how it relates to investors looking at the wrong thing. So, we had the Canadian science investor at one point there. And I like to look at these mental frameworks in very obscure ways because it can help us think about how to position our mindset for investing in individual securities, or if you're in a War II, planes would come home and they would come home with a ton of bullet holes. And they were very concerned because so many planes were getting shot down from like American planes were getting shot down

in the war just from regular bullets. And so they're like, how do we limit this? Like we need to give it more armor. Like we need to make it like anti-bullet armor, like the tanks have, but like, that's too heavy, right? Like that's not going to work. And so there's this balance between the plane being very maneuverable and light, but then still being durable from bullet fire from the ground. And so what they did was they analyzed all the planes coming home and they noticed that there was a very extreme density in bullet holes in the middle of the plane, the wings, and kind of like up the main spine of the aircraft. And they did this analysis and they said, okay, look at all these bullet holes.

We need to add armor in these locations. We can't do it to the whole plane because it'll be too heavy. Do you see a problem with that thinking, right? Like let's add armor to the locations where there are bullet holes. Are you seeing the problem with this, this kind of takeaway from the data? And it's okay if you're not. Yeah. I mean, I'm not a physicist or anything like that. So obviously, the wings are pretty important, right? So if you start putting too much weight on the wings and armors, it could actually just affect how the plane flies. But again, I'm not an engineer or anything like that. So that wouldn't be my assumption. Fair enough. And I think that that's a fair assumption. You can see the image I have here on the document. It shows the density of bullet holes on the wings and in the center of the plane.

Now, if you notice near the sides in the engine of the plane, almost no bullet holes. I said, oh, okay. Well, I guess that doesn't need armor. This is a complete error because the reason the planes are not returning with bullet holes there is because those are the ones that are getting shot down and don't return home. And so it's actually the inverse of what the initial thought was. You actually need to increase the armor in the places that there were no bullet holes because those are the planes that were actually not returning home. There was no data from those planes. And so it's very important to look at data, figure out what's useful and think a little bit deeper. Now, investors do a very similar thing. They look at the information they're given and the information they're given

at headlines and very surface level type stuff and apply it as signal when it's really noise. So if you are holding a stock for 10 years, most investors, even professionals, will have their correlation of their thoughts on how the business is doing with the share price. They think, okay, the company is doing great or not great based on how the stock has performed. We all do it. I do it. There's a bias towards that. Now, let's look at from this post from Market Sentiment on Substack. He did this little analysis and he shows, okay, let's look at United Health Group, okay? UNH stock. I think it's UNH. Yeah, UNH. It is a mega large cap company in the US. It's one of the largest cap companies in the world. It's a whopping 500 billion in market cap. It is literally one of the biggest companies in the world. Now, if you look at United Health Group, Now, if you look at UnitedHealth Group, they have compounded free cash flow at 13% per year,

earnings at 14% per year, sales at 11% a year. Low double-digit compounding consistently for close to 25 years, one of the most steady linear compounders of any publicly traded securities in the world. If you held that business and only looked at the business fundamentals, you would have never been silly enough to sell it. And so if you're looking at the business fundamentals, you come out with a really clear picture of how it's doing and thinking like a business owner and not ready to sell it. And so it's kind of like, what data set are we looking at? Are we looking at the bullet holes on the wings? Are we looking at bullet holes hitting the engine that are actually the problem? And so if you look over the last 10 years, during those numbers I just talked about,

they compounded wonderfully. You had max drawdowns in 2012 of over 20%. So the stock fell over 20% in 2012, over 10% in 2013, 10% in 2014, over 12% in 2015, 18% in 2018, almost 20% in 2019. You had a 36% drop in March of 2020. And now you're on a drawdown in 2021 and 2022 of both over 10%. Now, shareholders of United Health Group have made a boatload of money. They faced those drawdowns, but shareholders who focused on the business made a ridiculous amount of money. Now, this is, of course, a cherry pick stat, but United Health Group is up 363,000% since IPO. And so you have to remember, and I have to remind myself and force myself to remember that we're owning businesses,

not little tickers trading around a screen and focus on the data set that really provides signal instead of noise. Yeah, I think that's a good point. Obviously, at first I was wondering where you were going at with the warplanes. Well, you always have to. You always have to wonder, how is this going to come around? Yeah, and I was on Twitter last night and I saw a tweet from someone. I think they were quoting an article saying that there's a lot of Canadian millennial investors that are thinking of just

liquidating their stock portfolio right now because they're scared that it might go down even further. And that's a good, you know, I think it's a good link with what you just talked about, because I think first it shows that one, they probably don't understand either what they're invested in or how the stock market actually works. I think that's probably one of the big cause. And then the second reason is, you know, just caving into all that fear going on, because at the end of the day, it's pretty simple when you invest, you know, you want to buy low and sell high. You don't want to buy high and sell low. And I have a feeling a lot of those investors,

unfortunately, invested when we were smack in the bull market. Maybe it's their first time that they're seeing these drawdowns. They're hearing all the doom and gloom that's on CNBC or, you know, whatever mainstream financial media you're looking at. And they will, you know, I wouldn't be surprised a lot of people end up selling. And then, you know then a few years down the line, five, 10 years, whatever it is, they look back and just regret selling. Yeah, no, totally. And that is at the peak of despair and the peak of the sentiment going, I'm selling everything and just waiting. That kind of test limits of investors, both retail and in the professional space and people

managing money for clients, at that peak of negativity, you somewhere there find a bottom in markets. And that doesn't mean that it is here now. It doesn't mean that it's here tomorrow. But it tests your limit to remain invested and somewhere in there, markets find their lowest point. And that's just how behavioral finance works. Yeah. Yeah, exactly. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using

Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense, and with them, you can buy all North American ETFs, not just a few select ones, all commission-free, so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details.

That is questrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. Now we'll move on to some dividend talk. It's not quite a dividend portfolio. I just did this exercise because I wanted to look at what dividend yields are looking

at like right now compared to a year ago. I'd been looking at some dividend plays myself, some I already own just to add to the existing position and some potential new ones. So I noticed definitely that the yield right now that you can get is higher than a year ago, but it was more anecdotal. So I wanted to just pick out about 10 businesses. Some of them that I think are really good businesses, other I don't know as well. So just keep that in mind. Now I know Canadians, we all know Canadians love

their dividend stocks. I think it's probably a byproduct of the TSX being so heavily in financials, so banks, insurance companies, for example, and energy. So for those not aware, as of August 31st of this year, financial represented 31.1% of the index and energy 18.5. So basically half of the index is in those two sectors alone. So clearly you can find some pretty high yield in those two sectors alone. So clearly, you can find some pretty high yield in those two sectors specifically. And I know a lot of our listeners, they love their energy stocks or financial stocks because amongst other things, they do provide that good dividend yield. I think in general, Canadians have been, well, overweight the TSX for one. Yeah.

We both can agree on that, a little overweight the the TSX. By that, by a byproduct of being overweight, the TSX, you're very heavily invested in the big banks. Now, that has kicked back into a positive correlation because the big banks have been wonderful assets to own for Canadians for however long it's been. Decades of outperformance, very steady, pretty low drawdowns generally, and that whopping 4% to 5% yield growing. Yield on cost for these bank shareholders has made many Canadians extremely wealthy. You've heard stories of people making like 800K a year just in TD bank dividends. And so I totally understand why that has happened. Yeah. And just going back to your previous segment, I've been a big proponent of that saying,

you know, dividend stocks, if you have a full portfolio of dividend stocks, I mean, it may not necessarily provide you with the best total returns. But in times like right now, when there's massive drawdowns for a lot of people having, you know, a lot of dividend stocks that pay a good yield, hopefully they are good businesses because there are some dividend traps and actually good businesses as well in there. But hopefully it prevents them from actually selling because they do get that income. So I think there is some value there. Maybe you don't get always the best total returns, but if it prevents you from selling in a panic, that's really good in my book. And just a little disclaimer here,

the dividends I'm going to be referring to currently, there are some of these that recently hiked their dividends. So I just projected into the next year because for the most part, the ones that just hiked it do so every year. So if they have a quarterly dividend, they just hiked it. I multiplied that by four and then obviously divided by the share price that's currently there. So just a little disclaimer, if people are trying to figure out what I use. And of course,

if you're looking to invest in any of these, you do your research, definitely look at the payout ratio, how the business is going, the sales, the margins. These are all very important things. And of course, if you're focusing on dividend, if they do have a dividend policy, something you should be aware of as well. Anything to add? I would say, and I'm looking at the portfolio here you have. Well, the 10 names. Well, 10, sorry. Yeah, let me rephrase. And of course, none of this is advice, just some ideas and to give you some context of how much yields have increased when stock prices have gone down. I think for the most part, all the names you're listing here fall

into this category, but really focus on the ones that are hiking, even in tough times, like hiking that dividend and really growing sales and earnings and hiking that dividend during any time. These are the kind of blue chipper income type names that you're going to want to hold. I think that many of these in the basket fit that criteria. Yeah. I think most of them are actually recently hiked in the past year when I was looking at it because obviously I went, I had to go look at the dividend history to be able to do these. Now, the first one we've talked about it a whole lot, Brookfield Asset Management. So it's currently yielding 1.35% last year. So a year ago, it was 0.95%. So that's pretty much like a 50%, pretty close to it, 50% increase in just a year. And for those wondering, Brookfield does have a lot of debt, and we've been talking a bit about that.

I encourage you to look at their financial statements and just go look how that debt is structured. They have a ton of debt that's due in 10 plus years. They have a ton of debt that's due in 10 plus years. So they're very good at structuring their debt in a very advantageous way for the mothership, but also their subsidiaries. So I've had that question quite a few times. And on top of that, they do have very stable cash flows. What's not to like with this name here? Yeah. And they do hide their dividends.

They have a dividend policy. So they hike it regularly here every year. Now, the second one, one of those big banks, well, the biggest of the big banks, Royal Banks. So they're currently ticker RY.TO, currently yielding 4.16% last year. It was 3.38%. And all these names, it could be a combination of lower share price and, you know, dividend hike.

Some of them, the share price pretty similar, but they actually hike their dividends. Some of them, it's just lower share price altogether. But yeah, Royal Bank, probably my favorite of all the big banks here just because of their diversification in revenue and their global presence. The next one, Canadian Natural Resources, because I wanted to add an oil and gas play and energy play here. And the reason why I chose this one is ticker, obviously, CNQ.TO, in case you people weren't aware of it. So they're currently yielding 4.8% compared to 4.2% last year. And the reason why this is a really good one, especially if you want stable income,

is a really good one, especially if you want stable income. This was one of the few companies that did not slash their dividend during the spring of 2020 when oil really dropped. And their metrics tend to be really top of the line, especially if you start comparing them with Suncor, for example. Dude, CNQ, if you look at all the names, you look at the yield, it's got to be up there in top tier quality if you are an energy investor. It's one of the best names in town. Yeah, and for those wondering, I did not include the special dividend that was just paid because it is a special dividend. I only include basically projected the quarterly that's being paid right now. The next one, another bank, another one of the – is it the second largest TD? I think so.

Yeah. Yeah, I think it's the second largest. RBC, TD. Yeah. So TD – And then I think Scotia or BM, I don't know. Yeah, I think – yeah, I'm not sure. But anyway, so –

CIBC being the smallest by market cap, I think. Yeah. And so TD.TO, the ticker, right now it's yielding 4.22%. Last year, 3.73%. Not too much to add here. I think it's another one that's interesting just because it has a lot of diversification in the US. So a bit less exposure to Canada. But again, the majority of their exposure is still in Canada, but it has a substantial business in the US. The next one here, Equinix, ticker EQIX, I believe. I forgot. It's just going on memory.

EQIX, yep. It's one I own. It's one you own as well. So this one is yielding 2.18% right now compared to 1.44% last year. It's pretty rare that Equinix is over 2%. I'll just say that. It's a data read for those who are not aware. You can go back to some of our older episodes. I think you actually did a deep dive as well at some point, if it was early this year or last year. The episode was titled The Perfect Dividend Stock. There you go. If people want to check that out. Yeah. Now another one, I don't think we've talked about this.

One thing to add, Equinix has 78 quarters of consecutive sales growth. So just to go back to what we were talking about before, we're focusing on businesses that actually have strong fundamentals, don't just pay a dividend yield. That is so critical in your analysis. And Equinix has 78 quarters of consecutive sales growth, the longest streak of any company in the S&P 500. consecutive sales growth, the longest streak of any company in the S&P 500. Yeah, exactly. Now, the next one, Realty Income. So for those not aware with this one, ticker is O. Realty Income is a commercial real estate investment trust or a REIT. They lease real estate to businesses like grocery stores, convenience stores, dollar stores, quick service restaurants, and grudge stores. They're typically kind of, you know, freestanding

buildings, so they're not within malls. They have triple net leases, which means that the tenant pays for taxes, maintenance and insurance. So their costs are, you know, relatively stable. They do have other costs. 5% yield right now, 4.47 last year. It's widely known as one of the best in terms of that type of commercial real estate investment trust. And I think they also, I'm just going on memory here when I look, I believe they also have a pretty consistent history of hiking their dividend as well. Now, the next one, I wanted to add a tech play in here. I guess Equinix, you can kind of make a, I guess it's also a tech play, but Microsoft. So MSFT, this one does not happen very often that Microsoft is yielding more than 1%. It is yielding

1.15% right now. They do have a history of high kinder dividend as well. Last year, it was 0.77%. That's a name actually I already own. And I definitely have on my radar to add more because big tech has been a draw down heavily. And for the most part, I have, I think most of them on my radar with the exception of Netflix and Facebook, Netflix, I just don't think they have a great business model. That's just my opinion. And Facebook, I just, I can't get myself to invest in, sorry, I just cannot, I don't care how cheap it gets. I just, I can't get myself to invest in, sorry, meta. I just cannot. I don't care how cheap it gets.

I just, yeah, I won't do it. Too icky? Yeah, pretty much. It's also, we've talked about this a lot too, which is the big bet on the metaverse will go down in every business book written about this era as the greatest move or the worst move in business history from Zuckerberg. There's no in between, in my opinion. It is zero or 100 with that bet. And I think he knows that. Microsoft has become a utility. I think of Microsoft as a utility. And I was going to say Microsoft and maturation. I mean, what is it, like a $2 trillion company? As the income statement continues to

become more profitable, more profitable, I know they're already just generating cash hand over fist, but they have a lot of segments that are going to just be pumping out even more cash. Look at Azure growing over 40% year over year consecutively. That thing's going to just make so much cash. What are they going to do with it? Income investors are going to be rewarded. They're going to buy back stock. They're going to increase the dividend. It's over 1% yielding now. Your yield on cost on Microsoft in 20 years, I have a feeling will be quite nice. Yeah. And I don't know, have you heard anything about the Activision Blizzard acquisition? Any news on that? I feel like- It's been pretty quiet, but the arbitrage is insane. Yeah. The market thinks that the chances of the deal going through is at like 60% at this point.

Okay. No, I was just wondering. If you look at the arbitrage, if you look at the arbitrage, but I think it's higher. I think you can make money with this arbitrage. I don't know when the deal is supposed to close, but I think that Buffett's playing the arbitrage. Yeah, I knew he was. I was just wondering, but yeah, just kind of sidetracked a little bit here. And now the next name, TelUS, ticker T.TO.

I thought, you know, just having a telco here makes a whole lot of sense. I do like TELUS just because they're investing a lot, obviously, in their network, but also in other ventures. Like they're investing in TELUS help. They bought, that's something we didn't talk about, but they bought LifeWorks too. They made an offer earlier this year. So they are definitely diversifying a little bit. What is that? They manage like a wellness for employers, I think stuff like that, and also a pension. Yeah. So I think they're diversifying a little bit here. The reason in terms of Telus, they're paying 4.84% right now in terms of dividend yield compared to 4.4% last year.

So I think again, especially if you're trying to build an income stream, if you're closer to retirement, you'll definitely need some names that pay a higher yield to start. You want the dividend to increase over time for sure. But if you want to get some decent income, that's something you have to look at. The next name here, Canadian Tire. So ticker ctc-a.to. It's paying 4.4% right now. And last year, 2.53%. This is a combination of the share price going down, but also some massive increase in the dividends. I don't know the financials like all that well from Canadian Tire. We've talked

about it a little bit just on our earnings episode. And there's clearly questions about growth because they're predominantly if I think they're all in Canada, I don't think they have any operations in the States or maybe very marginally with some of the brands they own. But I was kind of impressed with, you know, just from a yield perspective, 4.4%. That is quite high. It is quite high for a good old Canadian tire. That's, is the REIT still spun off? I don't know. Publicly traded? Yeah, I really don't know. Canadian tire. I'm going to look that up while you're doing the last one. So the last one, speaking of REITs, so Granite Real Estate Investment Trust,

Granite Real Estate Investment Trust, Granite REITs. So the ticker is grn-un.to. Yielding 4.65% now was 3.37% last year. Again, this one is an industrial REIT. So one of their main tenants, and it was a spinoff of Magna, but now they have definitely more tenants. I haven't looked at their tenant breakdown recently. I know like four or five years ago, the last time I really dug into them, one of the big risks for them is that it was predominantly Magna International that was their tenant. So obviously, you have to be careful when it's one tenant so important for you, because if there's headwinds for that tenant, the REIT that leases to them will probably be filling that as well. They've done a really good job of diversifying outside of just their main tenant being Magna after the spinout. They've done a really good job of that because I agree,

it was a significant risk you had to think about when you have all these, I think Magnus, 50-ish plants in Ontario alone. It's 50 of 350 worldwide manufacturing plants, but there was a lot of push, I want to say in the last 15 years, to try to not manufacture in Ontario for these large international corporations, because you had extremely high labor cost and electricity cost and input cost compared to the US, compared to Mexico, compared to China and some parts of Eastern Europe. They've done a really good job moving away from that. Now, I think it is one of the highest quality industrial REITs you can find. I did just find out, I just looked it up because I don't look at Canadian Tire very often. The Canadian Tire Real Estate Investment Trust is, yeah, it's spun

off. It still trades under CRT.UN. It yields almost 6%. Holy smokes. But that just ties back to what we were just talking about before, single tenant type name, right? Yeah, yeah, exactly. And you know what I can do, you know, at some point this fall before Christmas, I know last year got a lot of positive feedback when I did, I think it was 15 or 20, I can't remember, dividend stocks for income. Maybe we can revisit that and go into a bit more detail. Back then, my goal was to get an average starting yield of 4%. I wouldn't be surprised if right now you can probably have a good portfolio with even slightly higher than that. And even having some GICs as well, a little bit in terms of having that

stable capital and income. Now it makes a whole lot more sense when you can get one year 4.55%. I know EQ Bank's offering that right now, or 4.7 compounded annually over several years. So the GICs are becoming a lot more attractive, especially if you're looking for income. Clearly, dividend stocks, especially if they're increasing their dividend, there's a lot of attractiveness there. But when you're looking to preserve capital, GIC is a good option as well. I own of this 10, I'm just looking, I own Brookfield Asset Management. I own Equinix and that's the two of the 10 that I personally own. I'd be happy to own Microsoft and the rest of them I would be okay owning, but not particularly excited per se. For me, I've been- Again, this is for me. Yeah, exactly. I'm not 65, retiring, looking to build an income. Yeah.

And for me, I'm actually looking to add a couple more dividend stocks to my TFSA because I just had a daughter and I'm trying to just build a little bit of more of a safety net. a daughter and I'm trying to just build a little bit of more of a safety net. We have an emergency fund, but I think it's just great to also be able to, you know, either reinvest a dividend or, you know, shut that reinvestment off and be able to withdraw it if you do need that extra little income. So I own right now BAM, Equinix and Microsoft. And the three, there's a couple names on here that I'm actually looking at. So Canadian Natural Resources, Realty Income, and Granite is the other one. So those are the three names I'm kind of thinking about. I like those. Yeah. So I need to do a bit more research.

Like I said, Granite, I researched it years ago. One of my big criteria will be what the kind of percentage is still allocated to Magna International versus the other tenants because they do have some. They have about 1520 now, but it could still be predominantly Magna. Yeah. Yeah. Like you said, they've done a good job of moving away from it, but it's still a very key tenant, of course. No, I agree with that. I think that's good. You know, he became a dad and now you're like income portfolio blue chip guy. Well, no, I still have. Becomes a dad, instantly blue chip income guy. I love it. I wouldn't say that specifically, but I do have, you know, some more risk in my portfolio, especially, you know, some growth stocks, but also Bitcoin.

And I'm also looking at names like, you know, I just said, like big tech, I'm finding really attractive right now. So it's not just dividend stocks, but I'm definitely trying to put a little more emphasis on that for that reason. Yeah. Hey, you know what? Maybe Google will slash their capital incineration program called other bets and just start paying a little bit of cash out to shareholders. I keep thinking that that's quite in the realm of possibilities within the next year out to shareholders. I keep thinking that that's quite in the realm of possibilities within the next year or two, but I've been saying that for a couple of years now. So maybe it's just wishful thinking. I don't care about the dividend,

but I care about them stop incinerating money. I guess when you make $22 billion in earnings from the search business a quarter, then it doesn't really matter that much, does it? Did you see that this year? is it Manish Praprai? Is it? Manish Praprai, he's an investor. Who's the CEO of Google? Sorry, I always forget his name. Sundar Pichai?

Sundar Pichai. Okay. Is that it? You don't seem sure. Yeah, he... Okay. No, yeah, yeah, yeah. I got you.

Yeah, no, Sundar Pichai. Yeah, Sundar Pichai. Let me Google. Yeah, Sundar Pichai, CEO of Google. You know what? The big tech CEOs, I mix them all up. I literally will say that Tim Cook's the CEO of Microsoft at one point, even though of course that's not true. It's the CEO of Apple. They're all just mega bajillionaires.

It's Tim Apple, by the way, but no. Tim Apple, sorry. I was just quick thing. I read an article. Apparently, they had an all-ins-on-deck meeting recently where he got a whole lot of flack from Google employees because they're looking to reduce cost. And I think obviously with, you know, it's kind of, you know, for shareholders, it's good. But if you're an employee, you're just seeing them like gush cash left, right, and center. It's like, oh, now you're making like kind of cost cutting. So I read an article on that. Apparently he got a lot of flack from employees. Yeah. Well, any CEO with that many employees definitely gets flack on a regular basis. Yeah. Sundar Pichai, Satya Nadella,

these guys are killing it. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission-free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly.

Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income.

But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at Airbnb.ca forward slash host. That is Airbnb.ca forward slash host. All right, let's move on here to the Kelly Criterion. The Kelly Criterion is a position sizing mental model I've discussed before. It aims to find the optimum stake to bet in a gambling scenario. And it's been adopted as a mental framework for investors and position sizing as well. A little bit less mathematically, but still valid.

It was used by Ed Thorpe to determine the perfect way to play blackjack. It was using optimum betting sizes given set probabilities. When certain cards are laid out on the table, you would determine – you got to be very smart, but you would determine basically the perfect size to bet optimally given the probability you win or lose. It's a very mathematical approach. You can look up the Kelly Criterion formula online if you wish. It's basically looking at the probability of winning, the probability of losing, and expected return to determine perfect bet size. You as a poker guy, I'm sure you've looked at lots of theory on how to ideally size bets

given what's on the table, right? Yeah, yeah, yeah. That's it, yeah. And so for investing, determining probabilities for us being right, it's kind of our job, right? Like what is the probability you're being right. It's kind of our job, right? What is the probability you're being right? But it's more nuanced than a game of blackjack or Texas Hold'em because in those games, there's a given number of cards and variables. The game has given probabilities at any point

given what is on the table in a regular deck of cards. Now, the stock market's not that simple, but it's still helpful to use this kind of thinking for position sizing. Now, here's an example I like to use. Simone, you got two options, okay? Use your two options. Option one I give you is you can 5X your money right now if you guess heads or tails correctly. Good offer. 5X your money on a 50% chance. You take that all day. Or you can double your money if the sun comes up tomorrow. You have a 50-50 to 5X your money or you double your money with a 100% chance of happening, which is the sun comes up tomorrow. If it doesn't come up tomorrow, well, you double your money with 100% chance of happening, which is the sun comes up tomorrow. And if it doesn't come up tomorrow, well, you got bigger issues. How are you thinking about

those two options? I mean, it's not as easy as people might think. You just have to do the expected value. So basically, you take the sum and then, you know, the heads and tails basically, you know, once out of two times, you end up with zero. And then once out of two times, you end up 5x your money. And is that greater than doubling your money every single time tomorrow? That's how you have to think about it. That's kind of a poker way of thinking about it. Exactly. And the implied return of 5x your money on a 50% is actually mathematically better.

But your certainty is different. So you're very interested in both proposals. They're both great, right? 5X your money, 50-50, that's a wonderful bet. You take that. The odds on that are amazing. It's a no-brainer really. But the way you're looking at that is you're not going to risk your entire portfolio on a 50-50. You're going to size that smaller. So you're going to say, Braden, I'm very interested in that bet, but I'm not going to give you my entire, I'm not going all in with my chip stack. But with option B, double your money if the sun comes up tomorrow, you throw in your whole stack of chips. You throw in your entire net worth to double your money tomorrow, 100%.

It's of course, you're going to do that. The real takeaway here is that you're betting much bigger on the probability of the sun comes up. You move in all your chips. It's not that the other one is a bad investment, it's actually a wonderful implied return. You're just sizing your position differently, right? That's the main takeaway. Now, we're not betting or gambling in the stock market. You're not putting your entire portfolio in any way, of course, that's silliness. But this type of theory and application is useful for sizing your positions. And the way I think about it is matching your conviction

for a good outcome. If my conviction for a good outcome is very, very, very high, I'm willing to make a position very, very high in terms of percentage. And on the contrary, if it's a 5X, but I might be wrong type scenario in my probabilities, I'm not going to size it the same way as I would something I'm more confident in. than some high-tech growth stock that has a huge outcome, but the probability of you being wrong is much higher than the probability of one of these very established utilities being wrong. Those are not equal. This is just a useful way to think about conviction and sizing your position and your willingness to be wrong because you'll be wrong at some point, right? Like it's just the nature of the game. Yeah. And obviously, like people know, I used to play more poker. I don't play really that much anymore with a child, but professional poker

players who play cash games, not tournaments, the best ones, they're great players, but the ones that have longevity also use good bankroll management. So that means that, you know, they may play $1,000 or, you know, even $10,000 on the table, but they have, you know, half a million dollars as a backup that they can use for poker. Because people sometimes don't realize this, but, you know, we'll keep it simple. Pocket aces against any other hand, if you go all in right away before seeing any cards, you're only an 82% favorite. It'll range depending on what the other hand is, but, you know, it's not a guarantee. And those guys are smart enough to know that they need to have a large bankroll, you know, whether it's 50x or 100x what they're playing to be able to sustain those hits because they could lose that

hand five times in a row. It does happen. It's unlikely, but it can happen. Right. So they're looking at that and going, okay, right out of the gate, just seeing two cards, nothing else on the table. I have a very good chance of success here. And so I'm going to size that very aggressively, but I'm not going to, you know, deplete my bank role, as you said, just based on that very good chance of me winning. I'm going to play it aggressively because the odds are in my favor, but I'm, you know, I'm going to be aware of the chance that I could be very well. It's very rarely 100% in poker. I'll just say that. It does happen sometimes, but very rarely. Yeah. Yeah. And more so in the market,

nothing's a hundred percent, nothing is guaranteed. And so that's just risk management 101. Should we go to this last segment? Yeah, I think, well, I mean. Listener question. Yeah. How are we doing? How are we doing right now? I think we're good, right? Yeah. I think so. That'll be, you know, probably a bit short of an hour total. Now, I got a great listener question on Twitter from at Evans Shirley Art. And the question was pretty simple. We touched on it, I guess, parts of it over time. But the question was, should you add money to stocks you already own or start new position? Now, I'll go over how I approach it and kind of the main things that

come to mind. I don't know if you approach it exactly the same way. I have a feeling that you probably do a little bit. But here are kind of the four main things that I'll consider and something you should, you know, think about when you're considering either adding to an existing position or just starting a new one. Well, the first thing for me is knowing how many individual holdings I have, because we have talked about that. Personally, for me, sweet spot is like 15 to 20. But I'm the most comfortable with I would say 13 to 15. So 20 is kind of pretty close to a hard cap for me, just because if I go more than that, I know I don't really have the time to be able to stay on top of all those companies. And I'm not including here index funds because those are just very simple in terms of, you

know, broadbacks, indices, you set it and forget it. So I don't consider those in that 20 kind of cap. So for me, it's pretty simple here. If I already have 20 individual holdings, then I should be adding to one of my existing position. But if I think it's a better idea to start a new position instead, then I need to really ask myself, do I have more conviction in this new holding than at least one of my current holdings? And if so, the answer is probably I should be thinking about exiting that existing position because I lost conviction in it.

Of course, this is something I'll do over a long period of time. It's not going to be on a whim. And if I'm thinking of starting a new position, it'll be a company that I've had on my radar for a while. Yeah, no, I'm with you. It's really like knowing yourself, right? Like if you have 30 holdings and you're like, oh my goodness, I need to cut back here and just know what your tolerance is. And that's why some people do the hybrid approach with index investing and owning individual securities. I think that it makes sense for a lot of DIY investors. Yeah, exactly. Now, the second thing to consider is chances are

you know the companies you own much better than a potential new position. I know there's a lot of people that will be super diligent before they start a position, but I think it's human nature. Obviously, you have extra incentive of following a company that you already own. Obviously, you know, I hope people stay on top of their individual holdings on a regular basis. I'm not saying here, you know, review the whole, you know, 10Q or quarterly release, you know, from A to Z every single quarter, but at least keeping an eye on those key performance indicators, like you've mentioned before those KPIs. Because of that, you know, you'll likely know these companies that you already

own better. And hopefully, if you do own them, like I said, my first point, you'll have, you know, strong conviction in them. So if there is a drop in the valuation, then very often, you know, what you already own, maybe just a logical choice to add to that position. And if the markets are broadly down, like they are right now, and you don't want to add to at least one of the stocks that you own, that's probably a sign that you need to review your portfolio. And there might be at least a name or two that you should probably consider selling or at least have on your kind of wait and see, and I'll give it a few more quarters. If you don't know what you own, when volatility hits, you won't know what to do. And so I think that this is probably one of the most, I don't know

the other points you're making here, but this has got to be up there as one of the most important criteria for deciding if a new position is going to come in. Do I know the business well enough to really track it? And do I know what to track? And that's why we talk about these KPIs and that's why I built the platform for tracking them easier, to make it easier for people understanding the key drivers of the business. Yeah, exactly. The third point here, if you are thinking of adding to an existing position, how concentrated are you in it? Because you know, your top holding in your portfolio is probably, and well, at least I'm hoping it's one of your top conviction holdings. Now, during a bear market, you're probably salivating at the idea of adding more to it

because, you know, again, I'm hoping that it's probably one of your top conviction. Now, if that holding is 20% of your portfolio, should you be adding to it? Because that's a pretty large portion. I can't answer that for you because, you know, if it's 20% of your portfolio, just know that, you know, it's very concentrated, but you might be okay with that risk. I know, Brayden, you do have some pretty large positions. I have some myself, but for someone else, 5% might be more than enough because they don't want to be that overly concentrated in one position. Just be aware of the more concentrated you are, the more it can be

good or bad, depending on where that holding is going. So if there's a big drawdown and say it's like 30% of your portfolio, you know, it's going to hurt quite a bit. But of course, same thing. We've talked about it. A lot of the billionaires, they're all a lot concentrated in, you know, their main business. So you kind of have to weigh both sides. But again, to that same logic here, maybe you have a holding that's 1% of your total portfolio, and you really like it and have been looking to add to it because the valuation was just too high. And right now, it's a good valuation to add to it. So I think concentration and what you already have in your existing holding is also something important to look at. I wholeheartedly agree with this. Match it to your conviction. And unless you're a psychopath

like me, owning 40% in one name into your portfolio is probably reckless unless you have extreme conviction and understand the business extremely well. And I like to think I have those boxes checked to be able to have a position as large as some of the ones I do. Yeah. And you also know the risks, right? So I think that's important. Obviously, I think Constellation is a great business. I don't think it's going anywhere anytime soon, but it's still a risk to be very concentrated in one holding. The last thing here I'll mention is consider just doing a starter position. Say you're pretty close to your maximum amount of holdings that you're comfortable in your portfolio,

and you have a few existing holdings that you may not be sure whether you want to keep or not, but you want to give it a few more quarters before you make a decision because you don't want to make any rash decision. I mean, what you could consider is just starting a starter position, a very small percentage. You know, it could be something like 1% of your portfolio because the benefit of doing this, and like I referred to that earlier, is that you have that extra incentive to follow it even closer because you have that skin in the game. So that's something you can consider, you know, if you have, you know, already a lot of holdings, you may not want to necessarily sell some or you just, you know, you want to wait and see before you decide to sell, but you really like, you know, company ABC and the valuation is very attractive. Well, you know, maybe do a

starter position and you can always add to it in the future. If again, your premise works out and your conviction is growing and still there for that new business. Especially if you're still in the process of understanding the business to a level that you're comfortable with owning it as like a full size. I think, I think this is really smart. Sometimes that kind of incentive or push to, as being a shareholder, to learn more and follow their quarters, I think that that makes a lot of sense. Because how incentivized are you to follow quarter after quarter of a business that's just on your watch list versus being a small position. I think that those incentives are entirely different and can be enough of a driver for people. I don't love doing this,

but I know a lot of people do. I kind of do do it though, although I say I don't love doing it. It feels like as much as what I just said, it feels like I haven't done enough work yet. And I'm just like, screw it, let's do it. And so I don't love doing it. Although I do do it. Yeah, that's, that's basically is the way I'm thinking about. I'm kind of like that, too. I've done it just a couple times on top of my head. And for the most part, just because of the time commitment required, I tend to be pretty strict on those 20 holdings. So if I'm looking to add to a new business, and I know it well enough, and I have strong enough conviction, I will review my portfolio. And there's usually one or two where

conviction level is, you know, maybe not as high as it should be. And then like I mentioned my previous point, I'll just, you know, sometimes just give it a few more quarters, see where it goes, and then I'll take a decision. Then usually if it's a good business that you're thinking of starting a position, you know, a couple of quarters will usually not make the biggest difference. It might, but I'm willing to wait a little bit of time and just do some more research on that new business as well. If it's a great business now, it's going to hopefully still be a great business in a couple of quarters. And if it's not, then it wasn't a great business to begin with.

No, the only thing though is the valuation, right? Maybe the valuation was attractive, but again, could go both ways as we're seeing right now. If you're in a bear market, it could be even more attractive in two quarters. So yeah, give and go a little bit there. I totally agree 100%. All right, thanks for listening to the Canadian Investor Podcast. If you are on Apple Podcast, can you throw us a little review? If you like the podcast, you listen every week, you throw in there, throw a little five stars, give us some feedback, only if it's good, duh week and you throw in there, throw a little five stars, give us some feedback, only if it's good, duh, and throw that in there because that helps us organically grow on the Apple podcast player. There's not a spot to write anything in Spotify yet, but you can throw us five stars in the top of the podcast player there for our podcast.

We appreciate that very much. If you are a real estate investor, say you own a couple of income properties or thinking of getting in the real estate game, we do have a second podcast now called the Canadian Real Estate Investor, which you can find on your podcast player. Go ahead. If you've been thinking about listening to it, we've been talking about it for the past two months, thinking about getting in the real estate game. Things are changing a lot with interest rates and the prices of real estate, especially around here and all across Canada. And it's a very dynamic and changing type of scenario. So go listen to Dan and Nick at the Canadian Real Estate Investor Show as well. Simone, anything else? No, no. Anything else on the slate?

I think that's it. Yeah, definitely will be for those who are on joinTCI.com, will be probably over the weekend, we'll be adding our moves. There's been quite a few for me. So just adding to some new positions, obviously sold some, like I said to the podcast, not really adding new position,

more like existing positions. There you go. Yeah. So for those who are on our podcast, not really adding new position, more like existing positions. There you go. Yeah. So for those who are on our Patreon, you'll see that probably, I would say, what, maybe early next week at the latest. I know you're busy until the end of the week. Yeah, we do it at the beginning of every month. So it falls on the weekend. So we'll have it ready for Monday, October 3rd. Yeah, there you go. And is the market closed on Friday? Yeah, I 3rd. Yeah, there you go. And is the market closed on Friday? Yeah, I think so. I think in my opinion.

Truth and reconciliation, is the market closed? I'm not sure. And then Thanksgiving, the following Monday, the market is closed. So next week, the market will be fully open and our updates to our portfolio on joinTCI.com will be there. Lots of moves from you. I've been pretty lethargic, but I think next month I'll be quite active just as accumulate a little bit of cash and deploy it.

So that is at join tci.com. It's very affordable for the podcast listeners. You get some stuff, you get a spreadsheet too, to help track your portfolio, the exact one that we use. And people have been loving that. So as a join tCI.com, we'll see in a few days. Take care. Bye bye. The Canadian investor podcast should not be taken as investment or financial advice. Brayden and Simone may own securities or assets mentioned on this podcast. Always make sure to do your own research and due diligence before making investment or financial decisions.