The Canadian Investor - 10 great companies that pay a dividend

Episode Date: June 14, 2021

In this episode of the Canadian Investor Podcast, we talk about: Recent news including the announcement from El Salvador to make bitcoin legal tender, the cancellation of the Keystone XL pipeline and Canadian banks earnings. Why anecdotal evidence can be misleading when investing Key concepts and ratios to use when looking at dividend stocks Ten great companies that pay a dividend Tickers of stocks discussed: AAPL, MSFT, HD. T.TO, BIP-UN.TO, V, CNR.TO, EQIX, AMT, MCO, TRP.TO, DGRO, XDV.TO, SBAC, DLR Getstockmarket.com The Canadian Investor Podcast Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital See omnystudio.com/listener for privacy information.

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How you doing? And tell me about this Bitcoin conference in Miami that just happened. There was a couple of cool takeaways. I did like the interview as a side note with Jack Dorsey. He had some really interesting things to say. You know, I'm not a huge Bitcoiner. I'm like a medium and you're much more involved in the space. And some really interesting takeaways came out of a bunch of nerds meeting in Miami. What happened with one of the countries? Yeah, some really big news when it came to Bitcoin. The highlight of the conference was El Salvador coming out and announcing that they would bring forward a legislation that would

make Bitcoin legal tender in their country along with the US dollar. So the announcement was made last week if I remember correctly and then earlier this week they actually went ahead with it. It was passed by their legislative assembly. They became the first country to have Bitcoin as legal tender in the world. Obviously they're still keeping the US bitcoin as legal tender in the world obviously they're still keeping the u.s dollar as legal tender they have some mechanism in place that will allow merchants to be able to exchange it right away if they wish to accept bitcoin and then translate it or exchange it right away to u.s dollars it's not a big country so a lot of people are saying it's a big deal for nothing i think there are approximately 7 million people in El Salvador.

And without getting into the whole politics and political climate of the country, I mean, it is some big news because it's the first country to do so. And one of their big reasons is that they find that they're too reliant on the actions of the Fed and the US and the currency. So that's why they decided to adopt Bitcoin. And they have some very progressive programs to allow all the residents to be able to access Bitcoin and be able to transact with it without going into too much detail. Personally, I think it will probably be one of many countries. We'll probably see a lot more countries that have been affected by hyperinflation. And when I say hyperinflation, I think you understand what I mean, right, Braden? I'm not

talking like 5% here. I'm talking people seeing the value of their money drop by half in a year because their currency is being devalued at such a rapid pace. So it's logic for a lot of these countries to follow in the footsteps of El Salvador. It'll be really interesting to see what happens with it. But personally, I think it's some really big news. It'll be really interesting to see if there is more countries that follow suit in the next year or two. Yeah, well put. And this is a stock investing podcast primarily. But we touch on these things. Because if you're not paying attention to something as interesting as a global digital currency.

It's worth paying attention to, is my personal opinion. It is worth paying attention to, whether you're a believer or a skeptic. It doesn't matter. I think it's worth paying attention to. All right, what's happening with energy here in Canada? There's a fairly big announcement. Yeah, so our listeners at West will probably be very well versed on what happened earlier this week. So the TC Energy, the company behind the Keystone Energy Pipeline, decided to go ahead and cancel the project.

It's been going on for years. It's been going on for years. They've had a lot of regulatory hurdles, protests, different governments being for it, against it, vice versa. I think it's been going on close to 10 years, if not more. And they decided that it just was not worth going forward with the project anymore after consulting with the Albertan government. So it was not personally a big surprise because i know there was a lot going on and when you see something that takes so much time and it's so extensive in resources at some point the company will just say like you know what screw this we're just going to pull the plug it's not worth our time and energy just think about all

the legal fees for example that they had to go through, all the money that they spent on this that'll pretty much be wasted. I'm not feeling bad for them in any way, shape or form. I'm sure they'll be just fine. But as a business decision, in my mind, just seeing the hurdles, with the biden administration in the states that we're seeing and also in canada seeing provincial governments and the federal governments being more and more environmentally friendly i think it was just a matter of time before this was going to get canceled it's been dragging on and on so at least there's some clear direction from tc themselves yeah we saw kinder morgan to pull the plug remember with the uh the mountain the trans mountain pipeline i think the federal government jumped in offered them uh pretty much a buyout because they were

close to doing the same thing pulling the plug and just selling the assets. And then the federal government jumped in. That was a couple of years ago. So that's why this decision to me comes as no surprise at all. Stock Canadian banking, the big banks have been basically forced to not raise dividends over the COVID period. And they are sitting on tons of excess capital. The largest lenders, the big six are sitting on 40 billion, 40 and a half billion in excess common equity tier one referred to as CET1. God, banking is so confusing. All right, CET1 capital is a fund of securities that regulators require banks

to set aside during periods of economic strength as a shock absorber in a potential financial crisis. So this is the Fed saying, hey, you got to have the war chest full at all times because the big banks are incredibly important to the Canadian economy. Like, let's not kid ourselves. So earnings are really solid for banks right now. Really, really solid. And they're sitting on all this cash and they're going to be allowed to increase their dividends soon. I expect huge dividend increases and some potential M&A from the big banks. The war chest has exceeded that 11% CET1 capital ratio, what they have to

sit at, and an excess of $40.5 billion from the big banks. What are they going to do? Probably buyback stock, majorly increased dividends. I'm talking 15 plus percent increases. This is just my estimations. TD has whispered on calls about potential M&A. I don't know what that looks like. But if you are a Canadian investor, chances are you hold banks. I think things look pretty good for the big banks. And it'll be interesting to see what happens. Tons of cash available.

Yeah, they've been getting some flag, though. I've been reading quite a bit because they've been getting some flag though i've been reading quite a bit because they've been increasing their fees they're increasing their minimum balance for people and their checking accounts to avoid paying the the monthly fee um so they have been getting some flag but because in part they've had such good quarters and are pumping money hand over fist it'll be interesting if there's any developments or if the feds kind of step in regarding those fees. But like you, I mean, if you're a bank shareholder, you're probably a very happy camper right

now. Yeah, especially when you own something like Royal Bank and the capital market segment just continues to get it done outside of that core retail banking segment. So as we've mentioned before on, we don't talk about banks a whole lot on this podcast, considering it's the Canadian investor podcast. But overall, I mean, they all have their core retail banking segment. And then it's like, what else? What are their other segments? What are the other growth opportunities? And they each have their own little thing. And just be aware of that and what kind of exposure you're looking for, act appropriately.

Yeah, exactly. Like Brayden said, they'll all have the retail. Make sure you know what they're exposed to in terms of their loans and then what other types of business they have because they're all a bit different. They're all a little different. they're all a bit different they're all a little different they're all a little different let's switch gears i want to so later in this episode because canadian investors love dividend stocks like a little too much and we're going to talk about dividends uh we're going to have a whole basically a whole segment this whole episode is going to be about dividends pretty much which is great for income seekers and we have lots of hot takes around that but we'll get to that before we talk about that I want to have a segment on something called

anecdotal evidence now what is anecdotal evidencedotal evidence is a factual claim relying on personal observation collected in a casual or non-systematic manner. quote-unquote fact based on their own observations, and when it says collected in a casual or non-systematic manner, meaning there isn't really any numbers to back it up, and the narrative on the street might be counter to what's actually happening. Now, the best example of this that I can Now, the best example of this that I can personally think of is Facebook. Okay? Everyone and their dog will tell you that Facebook is dead. Everyone they know is deleting Facebook. None of the Gen Zers use Facebook.

Facebook is corrupt. I have, this is an example of anecdotal evidence I go, Simon, what are you doing? why are you investing in Facebook? all my friends just deleted it no one uses it so that is me making a claim on personal observation collected in a non-scientific manner. That is a

perfect example of anecdotal evidence. Now, if you look at the financial statements, there is a very different story being told. Facebook is growing revenues at over 40% per year. It is growing monthly. It is growing in every single segment that it tracks geographically. You're seeing huge growth in emerging markets. You're seeing Facebook continue to get it done. WhatsApp is the largest messaging platform in the world. And the core Facebook blue app continues to get it done. Not to mention all the investments in VR and the future and potential growth there. But you can see how the word on the street that I'm claiming as factual evidence and what is actually happening are completely different stories, completely different narratives,

and anecdotal evidence should be avoided at absolutely all costs. There's just no place for it in investing. It is unfortunately using emotional or personal observation and stating it as fact. Now, let me be clear. If you are seeing in your life something interesting that could be an investable idea, or if you're seeing a company firsthand lose their moat and you have some insight on that, that's totally fair. That's completely fair. It's the difference between making a claim and a statement and the numbers telling a different story and the growth being so massive in other regions. It's just not really the case in terms of Facebook's business. So in that exact example. Do you have any other examples or personal experiences of anecdotal evidence just not really telling the story correctly?

I mean, it's putting me on the spot a little bit. I'm putting you in the hot seat right now i mean one easy thing would be someone who starts seeing a lot of electric cars for example on the street thinking that gas station will be obsolete next year so obviously that eventually that will be the case in most likely a couple decades from now if not more but that kind of assumption would be very misleading. It's like to say that fossil fuels are going to be gone- Tomorrow. In the next five years. Yeah, tomorrow. Yeah. It's just very surface level analysis

and should be avoided at all costs. Really, at the end of the day, it's surface level analysis that needs more digging before decisions are made based on it. So that's anecdotal evidence. Try to avoid it. That's it for that segment. Yeah, it might pique your interest and that's fine. If you see some anecdotal evidence and you're like, oh, you know what? This is interesting.

Just dig into it. It's a good reason to do more research. 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. All right, dividends. Let's talk dividends. Before we get into some numbers and 10 dividend stocks that we can get behind, before we do that, let's mention really quick. Let me just be clear. I'm trying to get my thoughts here. Do not ever, I mean seriously ever, and again, this is not investment advice, but do not buy a stock just for its dividend. I mean, can we say it louder for the people in the back? If you were to just buy companies because you like their dividend yield, you've probably done horrible. You've invested in value traps. And again, you've not done enough research on the company and the future of it. Buying a stock just for the dividend is a horrendous idea. Now, there's nothing wrong with getting paid dividends. I hold lots of dividend payers. I

love dividends. And you get paid by the companies you own. It's fantastic. But let me be clear. Buying a stock just strictly for its dividend yield is goofy and should be avoided. All right. Rant over. Simon, tell us a little bit about some of the numbers you look at when you're talking about dividends. Yeah. So dividends, here's a few concept or ratios to keep in mind that really just apply to dividend stocks. Obviously, if they're not paying a dividend, these things won't, you know, they won't hold true. The first one we've mentioned a lot in previous episodes, the payout ratio. There's different ways of looking at the payout ratio. You can look at it from the earnings perspective from free

cash flow perspective personally i like the free cash flow perspective because it's really a good indicator of the money actually coming in and out of the business and that will be a very good indicator of the sustainability of the dividend whereas, we've talked about it before, earnings can be very lumpy and may not give you the real litmus test whether they're able to continue that or not. The second one is, like Brayden said, dividend yield. I won't go into too much detail. You said it correctly. The dividend yield is very simple. It's the the payment of the dividend that you're getting divided by the cost of one share that will give you the current yield that will vary on a day-to-day basis depending on the share price and obviously if the dividend goes up or down in terms of dollar amount

that will affect it be very wary of very high dividend yields and that can vary by sector because if you have something that pays a 5% dividend that's in the tech space, that's a red flag right there. Whereas if you have something that pays 5% dividend yield in the utility space, that's pretty common just right there. So it may not be a red flag per se. And the reason for that, once you're on saying one's okay, one's not, is think of how stable the cash flows are for a power utility year over year. They're not going to have a huge drop in cash flow quarter over quarter and going to be paying a dividend that they can't afford. can't afford. And then if they do that, then it leads to the first one, which will exceed a payout ratio that is not ideal, which means they're paying too much of net earnings or free cash flow, depending on how you calculate it, to pay that dividend, which is not ideal. So it goes down

to how stable are the cash flows and more stable cash flows can afford higher yields. stable out of the cash flows and more stable cash flows can afford higher yields. Yeah, exactly. Yield on cost is another term that you'll hear a lot. So the yield on cost is pretty simple, is the cost you paid for your shares and the current yield. So this could be five years later, you look back at the cost that you paid for your shares and then you compare it to the current dividend and then you'll get the current yield on cost and that will usually you want the dividend to increase over time so your yield on cost will be higher and higher as you go you move into the future so that's just what yield on costs means is that you're looking at the current dividend that you're

receiving versus the price that you paid for your shares. The second one is the, well, the fourth one is the payout frequency. So the most common that you'll see is quarterly payouts. Sometimes you'll see biannual payouts, sometimes you'll see annual payouts, and sometimes you'll see monthly payouts. Monthly payouts probably more common with REITs. I was going to say REITs pay pretty commonly monthly yield. Exactly. But I would say the most common one overall is a quarterly. That's the one you'll see the most often.

The next thing you'll want to keep an eye on is the dividend growth rate. And that's something we'll talk about when we talk about our picks. You want to, as much as possible, you want the dividend to increase over time. Why? Especially if you're counting on that income, let's say you're a retiree. If that dividend increases 5%, 10% each year, well, your income actually keeps up with inflation or might even exceed it. The next one, these are more terms that you'll hear in the dividend space. So you'll hear dividend achievers, dividend aristocrats, dividend kings. So these are

different levels of companies that pay dividends. They'll typically be companies that will be paying dividend and increasing them for a certain period of time. D time dividend achievers would be 10 plus years of dividend increases So it's not just that they haven't They were consistent with having a dividend. They're actually increasing it on a year-to-year basis Dividend aristocrat is a pretty select group. Those are actually the definition is Companies that are part of the S&P 500 and have increased their dividend over minimum of 25 years. I mean, personally, you can use it in non-SNP 500 if you want to use that term just for fun, that's up to you. But the real definition is that. And the last one is kind of a very select group

is dividend kings. So same as dividend aristocrats but it's over 50 plus year period the one asterix I'll say for these two specifically aristocrat and Kings is these tends to be a bit more legacy businesses and one of the issues that you might see with those is they will tend to have much lower revenue growth they'll be more stable but keep an eye on if they they innovate over time and they're not too susceptible to be disrupted because it's all nice and dandy that they've increased it over 25 or 50 years but if they're not keeping up with the current landscape that you know the past doesn't necessarily mean anything for the future. Yeah, well put.

And you'll see a lot of these legacy businesses, they'll just increase their dividend by like a penny a share. Yeah, yeah. They'll increase their dividend by like a penny a share and say, hey, look, we're still getting it done. And you know what? A lot of them are fantastic businesses. Any company that's been able to actually increase a payout for over 25 years is probably a stellar business over time and been able to defend their position. You think of the Coca-Colas of the world type of businesses. And what you got to look at is if the dividend growth rate is something you're actually looking for.

And if it's on the lower side, I would want a pretty good business and a fairly decent dividend yield. So it comes in as a bunch of trade-offs when you're looking at dividend growth versus dividend current yield, just be more cautious on the second one because you could be buying a value trap if it has a really high yield. Yeah. And you want to also have, like personally what I'll do when I look at the growth is I'll look five to 10 years in the past max. You know, what they did 15, is I'll look five to 10 years in the past max. What they did 15, 20 years ago, if they've been increasing it,

probably not as relevant for the recent business. So that's something else to keep in mind. Did you want to start, Braden? Yeah, let's switch. So we've decided that we're going to do five dividend stocks each to put together like a solid 10 portfolio, 10 stock portfolio of dividend payers. We'll go over why we think it's a decent business and what some of those numbers are, the yield, how fast the dividend's growing. We'll go over those. Again, there are lots of companies that could fit this bill.

It is a fairly useful exercise to try to pick five each. And it's an interesting exercise in your portfolio as well to try to think of what would be your highest conviction names and probably weight them a little bit higher. And I think that's a fairly useful exercise. Again, this is absolutely just for information purposes, this stock portfolio is not investment advice. Do your own due diligence. But all right, I'll kick it off. So it should be really no shock to anyone if they listen to this podcast that I'm going to take Visa in this dividend portfolio. And you may be going, oh, Visa doesn't even hardly pay a dividend.

And you're right. I mean, the dividend yield is 0.5%. So this is not going to make you a lot of income. However, they have been consecutively growing the dividend at around 15% a year. The three-year dividend growth is 14.86%. We'll call it 15%. We'll call it 15%. They pay out as they grow. Cash flow is over time. The payout ratio is super low. And the runway still for them to grow it over time is exceptional.

So if you are an income seeker, if you bought Visa stock 10 years ago, your yield on cost, again, that's the dividend yield you'd be receiving based on your cost position way back when may be exceptional. So the yield might not be great now, but as they continue to grow it, your yield on cost may be exceptional. I think Visa is a perfect candidate of that. A lot of the companies we're listing here are good candidates of high yield on cost in the future because of that dividend growth. And I mean, Visa may be one of the best businesses on the entire planet. So I think it's worthy of being on this list. Yeah, it's a really good pick as a dividend stock. Obviously, it's a small yield right now, but who knows what it will be in 10, 15 years from now,

Small yield. Who knows what it will be in 10, 15 years from now, yield on cost. My first pick is Apple. Everyone knows about Apple. What's that? What's Apple? I won't even answer that. Yeah, don't.

So it's yielding 0.70%, not a huge yield as well. To give you an idea why Apple is a good dividends dog their revenue increase six percent as a compound annual grade over the last five years their dividends compound annual grade over the last five years is nine percent and they pay less than 20 percent of their free cash flow so there's a lot of room to grow just look at at Apple's financial statement. They're just making free cash flow hand over fist. It's crazy. It's a steady business with increasing revenues. They've been slowly going away from just relying solely on the iPhone as most of their revenue. So they're going more and more into a service business. That SaaS reoccurring revenue is

starting to pick up more and more for Apple. Good thing for them too is they buy back shares regularly. They have very loyal consumers, super strong brand and marketing, pricing power as we all know, and they're well diversified and an innovative company as well coming out with new products or new versions that people want to buy and they're really good at making these small acquisitions that go kind of under the radar and then you know some years later it's like oh yeah we paid like 100 million for that and then it's really fitting in well with their ecosystem it is the ecosystem we just did a report on on apple and we named the report The Ecosystem

because what you're talking about, all the services inside of the world of Apple now is really making a big part of the business now, and it's paying off, and it's making it really, really sticky. I mean, it's the largest company in market cap for a reason. Yeah, it's a two-sided network effect. Yeah, it's a two-sided network effect yeah it's a two-sided network effect too right because you have so many consumers which then makes it very attractive for developers to create apps and so on so it's like a circle that's why they can charge 30 commission

on their app store because if you want eyeballs if you want adoption to your app, you don't really have a choice. That and Android are the two main things out there. Yeah, good luck going somewhere else. That two-sided network effect is extremely powerful. Both companies we've listed so far have extremely strong two-sided network effects with Visa and Apple. All right, I'm going to go with Equinix, ticker E-Q-I-X. Equinix is a real estate investment trust and is a US listed business. It yields

about 1.3% with about a 6% dividend growth rate year over year. They are the leaders in data centers. So if you run a data center, you're going to need to house it in one of these facilities. Equinix and Digital Realty Trust are the two leaders. I like Equinix a little bit more. I know Simon, you own both players, which have done exceptional as of lately. You were buying them when they were cheap. I don't know why the market was discounting these. And it's one of those businesses that are really solid, have a huge runway for growth with data centers.

The demand for data going up is maybe one of the most asymmetrical bets on the planet. The demand for data in the future obviously has huge tailwinds. You don't have to be an equities analyst to come out with that hot take. I really like the business. It's structured well, it's managed well, and they're going to be able to capitalize on the growth moving forward. And data centers is probably a decent place to play. And you know what? I think it's reasonably valued. It was really cheap like two, three months ago, but I still think it's reasonably valued. You're going to pay more than most real estate investment trusts because you're buying data centers and it has lots of secular tailwinds behind it. But Equinix is a great company and I think it deserves a spot here.

Being a REIT too is very focused on distributions, aka dividends. But they're actually not called dividends for REITs, they're called distributions, but it's the same thing. You don't need to know the difference. Yeah, exactly. Yeah. No, that's a great one. I mean, obviously I own it, so happy you chose it. My next one, another one that needs no introduction, Microsoft.

It's currently yielding 0.87%. The reason why I picked Apple and Microsoft is i think it's important if you're looking for dividends to also have a diversified portfolio it'll be harder to find some in the tech space but these two obviously you get some exposure to that so you as well for uh like brayden mentioned equinix you also have exposure to that microsoft they've grown their revenues over the past five years at 13% annually. Dividends have grown at 8% plus over the five years annually as well. So compound annual growth rate, less than 35% payout ratio. They really have a very strong moat in the enterprise business. I mean, doesn't, if anyone's with their employer,

definitely they have to really, you know, they use, most employers use some kind of Microsoft product, whether it's Microsoft Office or something else. So they have a really strong moat in that space. It's a steady business with increasing and reoccurring revenues. So they've really switched over to the SaaS model very well. That started about 10 years ago now.

For example, they started switching over to Office 365 in 2011. There's not much more to say aside from that. They also have some pricing power, maybe not as high as I would say a company like Apple, but you can't really go wrong with Microsoft as a kind of set it and forget it type of business. What an exceptional business Microsoft has become. The cloud business is very exciting. I think Azure is taking the most market share and Microsoft's distribution is king. I mean, we saw that with the launch of Microsoft Teams taking an absurd amount of market share right out of the gate. And when it comes to tech, distribution is king.

All right. Another one, very similar. It's a very similar thesis to Equinix, which is American Tower. American Tower is the largest tower owner. So all of the 5G rolling out on their towers improves margins over time. And this business has been an incredible stock, like an absolutely absurdly incredible stock. If you were to look at some 13Fs on Chuck Aker, he's owned this thing forever. Really, really good business.

Again, it is structured like a real estate investment trust. The providers pay to have their equipment on the towers to serve up cellular networks. Again, the demand for data is only going up. It is one of the easiest secular trends you can spot. And American Tower and Equinix are going to benefit from that, each with data centers and then with towers providing that network across the world. Well, mostly in America, as the name suggests, American Tower. It pays a 1.67% yield. It's growing at about 15% a year, that dividend.

7% yield. It's growing at about 15% a year, that dividend. Again, this is a really solid business. Margins are going to improve. They're going to get more out of each tower as demand increases, and then the eventual rollout of new technologies as it comes. There'll be a 6G, there'll be a 7G. Data is only going to get better. And I think American Tower still has a long runway for growth and they're going to continue to benefit from these trends over time. Yeah. Yeah. It's a great business. I mean, you can really, someone who's looking for exposure and data REITs or cell towers, you can really could combine just a basket approach and do quite well. There's about about like kind of four names i can think of in that space so dlr digital realty equinix american tower weep and the last one sba

sba communications vacom's i think if you have a basket of those you'll be you'll be just fine in my opinion totally agreed and i guess all four of them are structured as REITs. I don't know if SBA is actually. I think so. I think it is. It is? Yeah. Don't quote me on that. Well, they've all been incredible businesses to own. They've all been such good stocks. Yeah, exactly. So now on to my next one, another name that needs no introduction, Home Depot. So Home Depot is currently yielding 2.14 percent seven percent plus compound annual growth rate rain for their revenue in the past five years their dividend has grown 20 percent over the past five years again compound annual growth rate less than 40 percent payout ratio one of the asterisks here

is keep in mind that they are dependent on the housing market to some extent. However, existing homeowners will need to go to Home Depot to repair their home. So they're not as affected from a housing downturn than you'd have your traditional home builders, for example. And it gives you some exposure to that space as well. Very popular program with professional. They have a loyalty program that's extremely popular. Professionals are very loyal. So they started that several years ago. Home Depot because I mean I don't need to tell you this is not anecdotal evidence go anywhere any big city you'll see several Home Depot stores and they'll be because of that they'll be mostly reliant on organic growth for their same store sales and increases in efficiency in terms of their profit so keep that in mind it's not going to be a super high growth business, but it's as good as it comes in terms of stable businesses.

I've owned Home Depot since March of last year, so it's done quite well for me. I started a position. I wanted kind of stalwart in my dividends part of my portfolio. Home Depot fit that bill. Very happy shareholder. I do not intend on selling anytime soon. very happy shareholder. I do not intend on selling anytime soon. What an incredible story Home Depot has been. And the environment right now is obviously incredible for Home Depot right now. People are very interested in upgrading their homes and they're able to pass off a lot of those costs, inflationary that we've seen in that space as well with lumber prices and the others onto customers. So they're able to protect themselves from that.

The distribution's incredible. The business continues to get it done. Home Depot is probably one of the best retailers on the planet, if not in the conversation for the best. As a quick side note, they've really improved their pickup with the curbside pickup i went at the beginning of the pandemic it was a bit of a crap shoot like it was not that well organized fair enough it just happened i've been going recently and it's very efficient like the way they've set it up like

props to them they've done a good job at improving it. Yeah, everyone had to react fairly quickly. And the ones who did it well and effectively right out of the gate last March were the ones that were able to ride out some of the benefits from it over time. Let's switch to a Canadian name, CN Rail. uh let's switch to a canadian name cn rail the railways have i'll touch on the news with cn and you know kansas city after but when it comes to businesses with really high defensible positions what you're looking for in a name that is going to pay a dividend, pay it for a long time, and hopefully increase it for a long time. The railroads are maybe type A example. It pays almost a 2% dividend yield, which is higher than usual based on my historical knowledge of that.

And it grows at around 10% a year, sometimes even up to 15% a year on the div growth with a fairly low payout ratio still. So long, long room for them to increase it over time. So if you look at the assets they own, they are a toll booth collection type of business over time with their railroad infrastructure. It has been generating profits for over 100 years on those assets. And I would be shocked if they weren't in another 100 years from now. So long term, very defensible position. You can't come in and disrupt the rails. It's very difficult to do. And CN Rail is one of the bigger and best operators in the space. I'd be happy to own it here. I don't, but I'd be very happy to own it here. I think all of the worries around CN Rail and KC Southern's deal and the war happening with CPU Rail is now priced in. I don't see any downside if the deal does or does not go through. It seems to be priced in all of the issues and the fees they'd have to pay and kind of the whole wild goose chase that's all been if the deal does not go through

right now cn rail is still a very attractive business the infrastructure's been in the ground for a hundred it'll be in the ground for another 100 and it's uh it's a phenomenal business and it's uh bought and sold on the tsX for all our Canadian listeners as well. Yeah, well put. And if you own it, you have a little bit of drama to follow, so what's not to like? Yeah, who needs reality TV shows on Netflix when you got CN and CP going at it? Yeah, exactly. So my next choice will be TELUS.

So it's not a company I own, but if I were to own a telecom in Canada, TELUS would probably be it. Granted, I'd have to study the business a bit more, but from what I know and at first glance, kind of looking at their statements and so on, here are some takeaways. Revenue is growing, but it's definitely slowing since TELUS is obviously a more mature business. Lots of investment in wireless infrastructure right now. That's not specific to TELUS though. You'll see the same thing for Bell or Rogers. You'll see the same thing in the States as well with AT&T and some of the big carriers over there. The dividend has increased 6% annually on average so their compound annual growth rate over the past five years little side note free cash flow will be volatile so if you look at their financial statement you'll see that free cash flows kind of goes up and down that's because there's

been a lot of massive investments recently so you know keep that in mind when you look at it. It's not necessarily a red flag. It's more understanding what's going on. And one of the major reasons why I do enjoy TELUS is because they have a growing part of their business, which is TELUS Health. Still a very small segment from the figures I could see. It's around $150 million, maybe a little more than that in terms of revenue so it's still a small portion but there's a lot of growth there they launched not too long ago TELUS well part of TELUS health or telemedicine offering as well so they have some financial

resources to bag that up and TELUS health also is in the kind of pharmacy not the pharmacy but the script the health script which is without going into too much detail is part of the prescription when people order that so i'm not super familiar with that part but i know they have a segment part of telus health again do your due diligence if you invest in telus but like all um like all the telecoms they do pay a pretty good dividend right now it is 4.6 roughly so you'll you'll get a good dividend but again you won't get a hugely growing business but if i had to pick between them bell and Rogers, I'd probably go with Telus. Yeah, fair enough. It's an interesting thing, right?

Because the Canadian large cap, big dividend yielders are like the telcos, banking, and energy. And when it comes to the telcos, they're very similar to what I was talking about with banks is they all have this core oligopoly. Their core business is an oligopoly with very stable cash flows, very defensible positions, but where else can they flex optionality? And for Telus, it's them doing this health business. The other ones have their own things, but it's very similar to the banks. It's like, where can they also flex some optionality outside of their core oligopoly? So very similar in that nature. And they pay juicy fat dividends for those who are into that.

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. All right. My last pick is Moody's Corporation. Moody's Corporation is in a duopoly with S&P Global, the same company that does, administers the S&P 500. But Moody's Corporation is the largest rater of debt. If you are a bond issuer, if you are, if you're going to issue a bond, you need to get it rated by the rating agencies, Moody's and S&P. There's only two names in town that are going to rate your bonds. And Moody's continues to benefit from that. I think there's a lot of tailwinds still, a lot of companies issuing debt. I mean, why not? Money's so cheap, right? So that segment of the business is growing really solid. The other segment of the business, which is called Moody's Analytics, is doing exceptionally well. It's that high margin SaaS type business. are so good, it's hard not to ignore. I own the stock. Buffett's owned it for a long time. It's been a long time Berkshire owned business. It's an incredible business. What's the yield here?

It's really small. It pays 0.66%, but they grow the div at about 10% a year. It's one of those companies that, yeah, there's still so much upside and so much optionality they can flex over time that they're not going to pay a really high payout ratio. They want to retain a lot of that cash and invest it in the business. They have really high return on invested capital. So it would actually be a poor use of capital to increase the dividend more than they currently are. I like that from a business and I own Moody's here and I probably will own it for a very long time. And it pays like a dividend 30% higher than Visa. So that's pretty good. It's pretty good. 30% from nothing. Yeah. So my last one here, so people are probably saying like oh there's no brookfield name no

we're keeping that for for my last pick uh so brookfield infrastructure partners i could have picked uh renewable partners but i decided to go ahead with this one for a few different reasons yielding 3.67 percent right now they've had amazing revenue over the past five years, so 30 plus percent compound annual growth rate in revenue. Dividend has increased more than 6% annually over the last five years. And that's actually, that's something I want to highlight because that's in line with what management has been forecasting each year. So they typically give a bracket it will usually range between five and nine or ten percent so it's right in there and that's something i do like about brookfield because when management says something you can usually count on them doing so so that's like

proof is in the pudding as they say next thing oh you want to add something go okay nope i'm i got nothing so next thing is that i want to highlight is if you look at the financial statements from for brookfield infrastructure partners bep would be the same thing the payout ratio might look a bit out of whack when you're looking at free cash flow and that's because brookfield the way they do their business is they tend to recycle existing assets that they've extracted in their view the most value and they can get a very good price for and then use those funds in the following years to buy assets that they find undervalued so they kind of do that over and over you'll see that they tend to keep certain assets for a very very long time or never touch them but some of them they'll actually do that so that's why you'll see

that their free cash flow will vary quite a bit because if you're selling an asset that pays a lot that gives you a lot of free cash flow on one year and you're not replacing it next then you know the following or the year after that, it may impact your free cash flow a little bit. So just keep that in mind. It's nothing to be worried about, but you will see their financial statements, specifically free cash flow kind of go up and down. Tends to have consistent revenue since it's infrastructure related. Big tailwinds with governments right now investing huge amount of infrastructure. I don't know about you, Brayden, but it seems like every day almost there's news about the U.S.

investing like just in tea. So it's always like, you know, one trillion here, one trillion there. Let's let's throw another five trillion over here. It's like there's news, it sounds like, every week about a trillion of dollars in investments. And Canada's not doing the same, obviously, to a lesser extent. They're also investing a lot of infrastructure. So I can only see a company like Brookfield Infrastructure Partners benefit greatly from that. Yep. infrastructure partners benefit greatly from that. Yep. And Brookfield Asset Management, the one that actually has a lot of those funds for the pension funds to invest in.

The mothership. The mothership. Yeah. I mean, owning any of the Brookfield names makes a lot of sense here. You know what? I just wanted to – you heard me messing around with my mic, so I was trying to figure out what the names of these are. But I just wanted to you heard me messing around with my mic so I was trying to figure out what the names of these are but I just looked it up and there are two dividend ETFs that I think are worthy looking at if you don't want to own these 10 names and you want to just one and done it

or in this case two ETFs there's one that's of US holdings called DGRO D-G-R-O, from iShares owned by BlackRock. It's like eight basis points bought and sold on the New York Stock Exchange. The top 10 holdings, which you'll find interesting because you just named like four of them, are Microsoft, Pfizer, Apple, Johnson & Johnson, JP Morgan Chase, Verizon, Procter & Gamble, Home Depot, Cisco, Merck & Co. And then another iShares, which is listed on the TSX of Canadian names. The top 10 holdings are CIBC, Canadian Tire, Labrador Iron, Bank of montreal royal bank of canada tc energy bell or bce bank of nova scotia

td bank and national bank so i mean to no shock there you get like the big six banks in there but you know they they fit the criteria they pay a high yield they grow the criteria. They pay a high yield, they grow the dividend, and the business is growing. I mean, what more could you ask for as an income seeker? You're looking at a pretty good place there. So that ticker is XDV, the iShares Canadian Select Dividend Index. And Vanguard will have the exact same product. So before I get comments about that, what about this Vanguard

product? Just buy whatever one has the lower management expense ratio, that MER number. You'll see it on the fact sheet. Again, iShares owned by BlackRock and Vanguard are providing like for like products. Don't sweat even a second of stress deciding which one you should pick between them because they're basically the exact same product they hold the same things if you can buy one at a cheaper fee you should do that but if you're an etf-er that is xdv on the tsx and dgrow on the new York Stock Exchange. Maybe at some point we can just do a full episode of different dividend ETFs that people can look at because I'm sure there's, well, I know there's a ton.

A thousand of them. Yeah, a ton of them with different, obviously, exposure for each of them. That's the one thing I would say, whichever ETF you're looking at, make sure you look at those top 10 holdings specifically, especially if they represent a big portion of the total holdings. Because one thing that jumped out to me for the Canadian one, no surprise probably to any of our listeners,

but it's very heavy energy and banking. At least the US one, there's more diversification in that. Obviously, the yield is probably way higher for the Canadian one because of those holding. But again, you're very concentrated to those sectors of the economy and specifically the Canadian economy. Yeah, well put. Try not to separate the fact that it's an ETF with the actual core holdings of what makes up the fund. But you're right. I mean, there's 394 holdings in the US listing one. And 12 in the Canadian. They don't do their fact sheets. They don't do their fact sheets like for like on the Canadian and US. It's saying that there's 10 holdings in this one, but I don't think that's true it has to be a bit i was making i was doing like it was a joke when i said no i'd like there's probably like 30 though like it's not

it's not that much different they probably have some of the reits and uh and some more oil names probably other than that i bet you not much different. Okay. Thank you so much for listening, guys. We get tons of questions about dividends. And I think it's worth talking about. If you're an income seeker, which is totally cool, if your investment horizon is lower, if you're entering retirement, dividends are awesome. I love getting dividends. I would also like to restate the fact that if you are buying a stock just for the dividend yield, pause, think for a second, that's probably not a solid thesis to own something, right? Simon, it's not a good thesis, start and finish. Yeah, this company pays a 6% yield. Think about it. That's awesome, right? Well, maybe not. Maybe it's not a good idea. You got to think of if you

were to own a lot of those high yielders, you've just been getting smoked by the index. index probably right like you own energy and telcos and uh you would have just gotten gotten slaughtered by the s&p 500 made up of a lot of those big tech companies that continue to dominate so keep in mind that it may not be a good thesis to just own something for the dividend yield a good thesis to just own something for the dividend yield. Yeah. Yeah. No, thanks for that.

Yeah. You're like, yeah, Mike drop. All right. Thanks for listening guys. Appreciate it. This has been the Canadian investor podcast.

You can follow us on Twitter at CDN underscore investing. That's Canadian underscore investing, but CDN. We'll see you guys next week. If you go to getstockmarket.com, you will see my model portfolios. We're actually coming up with one for dividend seekers, which is nice. That's going to be out this month as well. If you go to getstockmarket.com, we'll go to Stratosphere.

You'll see it all there. You can get a free trial. Thank you so much for listening. Take care, guys. See you next week. Bye-bye. The Canadian investor is not to be taken as investment advice. Braden or Simone may own securities mentioned on this podcast. Always make sure to do your own research and due diligence before making investment decisions.