The Canadian Investor - Building A 15 Dividend Stock Portfolio To Yield 4%

Episode Date: December 13, 2021

In this release of the Canadian Investor Podcast, we discuss the following topics:  The differences between asset light and asset heavy businesses Simon looks at a 15 dividend stock portfolio that will provide an average starting yield of close to 4% and dividends that grow over time The recently announced Bitcoin and Ethereum yield ETFs   Tickers of stocks discussed: BEPC.TO, BIPC.TO, DLR, AMT, CNR.TO, CAR-UN.TO, ENB.TO, SU.TO, BCE.TO, T.TO, TD.TO, BNS.TO, QSR.TO, PEP, STOR Covered call ETF episode: https://thecanadianinvestorpodcast.com/episode/canadian-professional-services-stocks-and-how-fees-impact-your-returns https://thecanadianinvestorpodcast.com/ 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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I'm Brayden Dennis, joined by Simon Belanger. We're recording two episodes for you guys today, and there's lots of fun stuff that we're talking about. Today, we're talking about asset light businesses. Simon's going to go over a 15 stock portfolio to give you a 4% dividend yield if you are in that stage and needing that kind of portfolio and lots of other fun stuff on the slate. Simon, how are we doing? We're doing back-to-back show recordings here. How many coffees are you on right now?

Because I'm a little bit concerned for your heart on the amount you drink per day. I don't know. I'm probably below 10. So that's good. Below 10. Okay. Just making sure. I won't specify how many, but below 10.

Okay. The over-under is set at 10. Now that we have the precedent set on the coffee intake. Okay. I'm going to start off here with a segment on the show about asset light businesses and comparing them to asset heavy businesses. I'm going to use asset light and capital light interchangeably here, or on the contrary, asset heavy or capital intensive. So forgive me if I'm switching between them in this segment. Don't sweat the small stuff. They're the same thing when I'm talking about this concept. So asset heavy businesses or capital

intensive businesses are defined as a broad term to describe business models of companies which typically own a lot of their fixed assets outright, which are utilized to generate income for the company. Let's think of a car manufacturer, for instance. They own the machines that sit inside the plants. They own the robots painting the cars, for instance, in a painting facility. They own the injection molding machines if they're making plastic bumpers. They own the conveyor belts that moves the parts. This list goes on of equipment that would sit inside of their plant. Now, these businesses have very heavy capital expenditures, and those assets are worth a lot of money and sit on their balance sheet. Now let's use a really easy example comparing asset heavy and asset light.

Let's use a local cab company who owns the cars. They own these yellow cars versus Uber. The local cab company owns a fleet of a hundred in our example. Let's say those assets sit on their balance sheet and they required an upfront investment of $25,000 per year. Also, maintaining them is another expense line item later. Versus Uber, who operates a platform, their assets essentially are lines of code that operate the platform to connect riders and drivers. None of these cars sit on the balance sheet. According to research I saw from Goldman Sachs, capital intensive businesses from the period of 1990 to 2020 returned approximately 300% and capital light businesses returned 1600%. So let's make sure

I got that correctly. Capital intensive businesses, approximately 300%, and capital light returned in excess of 1,600%. Now, the reason for this disparity, if we look at the data, it's like, well, how could this be? Well, in that time, tech drove most of these index returns, and they're driving most of the index returns lately, especially these large mega cap tech companies. There's also some discrepancies I want to point out, like finance folks making an index of these companies in a basket saying in their ivory tower going, yeah, Amazon's a technology company, so it's an asset light business since it's a marketplace. Yet, if you look at Amazon, cloud infrastructure has a lot

of CapEx and they own, Simon, a ridiculous 450 million square feet. Can you just conceptualize the scale for a second? They own 450 million square feet in their warehouses, which is obviously capital intensive. So the point I'm trying to make in this segment is with these slight anomalies like the Amazon example, the world has changed. And the fast growing businesses that are solving problems today on a global scale, and maybe the businesses that don't even exist right now, but will change the world in the future, are fundamentally different in the way we look at it. And this could be a reason why maybe 20 years ago, price to book would be a multiple that we

talk about, but it's just not that useful anymore. And this is one of those reasons why. Yeah. Yeah. That's a good point. I think some metrics will still be useful. You mentioned price to book. Obviously, if you're looking at banks or you're looking at asset heavy businesses, there's still some value in using those metrics. But if you're using it on asset light businesses, it won't make any sense. And when I started investing, that's a mistake I made because I would look at these businesses and be like, oh, the price of book ratio is out of whack. And then I quickly learned that it didn't really apply all that well to these

businesses. So there's all these different kind of metrics out there. Some will be more useful for certain type of businesses. Some will be more useful for other types of businesses. We've talked about P price to earnings ratio While if the company doesn't have any earnings, it's not very useful. If it's growing really quickly, like we've seen Amazon in the past decade or so, it may still have a big, huge runway without having an attractive price to earning ratio. But I think, yeah, that's a good comment about these two types of businesses. But there's also some good asset heavy businesses. Oh, there's tons.

Yeah, exactly. There's tons. And that's where I wanted to go with this next segment is, this is just me pointing out some data discrepancies between performance, but I am not here to say that one is better than the other because CapEx can absolutely be a competitive advantage and a moat. In my car manufacturing example before, it's hard for competitors to come in and just build those manufacturing plants, especially if you don't have the skilled labor force of putting together an assembly line, painting cars with a robot. The barriers to entry are extremely high.

Some Stanford or Waterloo software engineering grad isn't interested or able to just start building these manufacturing plants, but they may be interested in writing code to disrupt insurance or payments or CRM software. You get the picture here. But I just wanted to point that out because as investors, we're trying to fish where the fish are. And if great businesses that exist now and may exist in the future are typically just different, they're just fundamentally different. We've been talking about that. I don't know. I know I have been talking about that a lot lately with these businesses are just different, like fundamentally different. Even 30 years ago, if I was to tell you the scale of some of these tech

companies, you wouldn't believe me. And I think that we're still going to continue to underestimate how powerful some of them will be in the future. So I just wanted to have a quick segment on that. Yeah. Yeah. And just before we move on to the 15 stock dividend portfolio to get a 4% yield, I wanted to mention too that when you look at these type of businesses, make sure you take into account similar kind of businesses. If you're looking at gross margins of a fast-growing tech company compared to a auto manufacturer, clearly they won't have the same margin. So I think that's a good reminder to just make sure you compare apples to apples when you look at different businesses that may

be in different sectors. Yeah, that's well put because a lot of metrics, while they are useful and while valuation multiples are useful tools, if you're comparing apples to oranges, just throw out the analysis. It's not helpful. That being said, there are a lot of metrics. Maybe we can go through this in a segment at one point. There are a lot of metrics that are useful for screening across the entire market. Like revenue growth, for instance. I don't care what kind of business it is. If it's growing fast, I'm interested type of thing. So there are metrics that you can kind of screen the market with. By the way, there is a free stock screener on stratosphereinvesting.com. We just upgraded it. You can export the data. It's beautiful. So there are metrics you can screen the market with and some that when it's apples to oranges make very little sense to do so.

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. 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. So now moving on to, like we mentioned earlier, 15 stock dividend portfolio to give you a 4% yield right now. So I've alluded to that in the past that I built my parents retirement portfolio when they did their financial planner. And I say that in air quotes here, who had them in funds and mutual funds that were on average, I think 2.75%. If I remember correctly, unfortunately, a lot of people are in that

situation. I just got a tweet from someone today who's in this kind of portfolio right now. When I built their portfolio, I want- It just pains me, Simon. Sorry to cut you off. It just- No, that's okay. Oh, you see that and I feel unwell when I look at those numbers. No, exactly. So coming back to this 15 stock dividend portfolio, when I built their portfolio, I wanted to make sure it could last for all of their retirement. So obviously their situation will be different than other people's situation. They were very close to retirement

when I took that over for them. They were just a year away. So they had a decent amount of money, but nowhere near enough to make it work without good returns. So because fixed income hasn't been providing much yield for some time now, I decided that with some research that a portfolio of dividend stocks made the most sense for them. Obviously, I spoke to my parents. My mom's an accountant, so she understands this stuff pretty well. And my goal was to achieve an average starting yield of at least 3.5% with 5% or more in dividend increases every year. So I was trying to find a balance between starting yield and dividend increase, which as you'll see, is not always easy to do. And with this strategy, we're aiming to essentially live off the dividend payment with selling as little stock as possible. The first thing I made sure is that they had enough cash to cover three years worth of expenses.

Because you want to make sure if the markets do fluctuate and say all the companies in their portfolio cut their dividend, which is extremely unlikely with the names that I'll be talking about. Well, you want to make sure there's at least a cushion that may vary for some people. Some financial advisors may say it's better to have five years, but for them, the three years made sense. And I used an assumption of 5% of cost of living increase each year. I may actually adjust that a little bit on the higher side going forward. This provides an extra layer of security. And in the unlikely event, like I said, that the companies all cut their dividend. I could have done five years, but for me, the two years additionally that they would have to have in cash would really eat up their return.

So that's why three years made a lot of sense. I'm surprised you even did three. Just how I know you think about cash. But I agree, I wouldn't. Three is conservative enough for me, I think anyways. Yeah. And that cash could be just put in GICs with a layered approach. And I can talk about that a bit more in another segment on another podcast. Could be in a high interest savings account. Of course, I say high interest in brackets because you'll probably get 1.25, 1.3%. But in reality, what's happened is that for them, they can essentially cover all of their expenses now with their dividend payment. In the event that they can, they can

just cover the difference with that cash that's set aside for the three years in the future. So this strategy has worked really well for them over the last five years. That's when I started it for them. That's despite the big correction that we saw in March of 2020,

which clearly their portfolio did go down, but for the most part, they still kept getting those dividend payments. So I'll just go over the criteria here. Goal was to achieve at least 3.5% starting average yield equally weighted. Achieve at least 5% dividend growth on average. Having mostly companies where the dividend is well covered by free cash flow or funds from operation, just depending on the type of business that it is. I was looking at a history of dividend increase or a stated dividend policy whenever it was available by management.

And of course, you want to see these dividends that keep increasing over time. I tried to diversify the portfolio as best as I could, but it's not easy balancing yield, good companies, and sector diversification. I tried to include as many Canadian names as I could to make it as friendly as possible for a TFSA. Whenever there was a sector that was equally well represented in Canada or the US, I opted for the Canadian company. So before I go through the names, did you want to add anything, Brayden? I didn't realize you had been doing this for five years. That's my only comment. I knew you had done it for a couple of years, but I guess this is kind of like proof in the pudding that this has been

going well for half a decade now. So that's great. Yeah, exactly. And some of the names I'll mention, they do have in their portfolio, not all of them. And of course, you can probably substitute names with other names that would be similar. So this is just an idea of the 15 stock portfolio. And the average yield here that I have achieved was 3.81%. It may be a few percentages off just because I did that over the weekend. So the price has changed. And this is with an equal weighting on all of them. Equal weighting. Exactly. Before we get in, I just want to double tap on what you said there was, these are just examples, right? This is not investment advice. Don't go out and build this

portfolio to a T. This is just a useful exercise for us to go through in terms of, hey, I'm building an income portfolio. That serves a purpose for investors looking for income. Myself, my age, Simon, his age, it doesn't make sense for him to build a portfolio like this. And our own portfolios look vastly different than what we're talking about. But I just wanted to double click on that. So before you go ahead and build this portfolio at home, these could be interchanged. These are just the types of things we're looking at with dividend sustainability, dividend yield, the dividend growth, the payout ratio, the durability of the actual business. And it's more so useful in the process

versus the actual stocks we're discussing. Yeah, exactly. And you'll see if you've been listening to the podcast a lot, there's names that we both like in there. And there's names that we've been more skeptical on them. And I'll explain why I added them on this list. So the first one, Brookfield Renewable Partners currently yields 3.46%. What I like about Brookfield is they actually state they have a dividend policy for BEP five to nine percent per year going forward. Historically, they've been around six to seven percent. Make sure if you do check their history, they've had some recent stock splits, so it may look a little bit out of whack, but you've seen your dividend grow if you've owned shares of them.

I'm pretty sure you like this name, so I won't ask for your comment on this one. I'll chime in where we go here, and then I have some names to add later. But yeah, just feel free to rifle these off. Perfect. So Brookfield Infrastructure and Partners, the second one, ticker BP, 3.62% yield. Over the past five years, they had an average of 5.6% compound annual growth rate for their dividend increase. The reason why I chose these two, Brookfield and not BAM, is because of the yield.

So that was on purpose right here that I chose that. And for the purpose I was looking to build in terms of portfolio, these two names made more sense than BAM. I love it. The Canadian equity dividend portfolio on Stratosphere has these two as two of the highest weightings in the portfolio. It's brilliant and it works. Next one is Digital Realty Trust, ticker DLR, 2.81% yield. Over the past five years, they've increased 5.6% their dividend on average. Next one is American Tower Corporation, their dividend on average. Next one is American Tower Corporation, ticker AMT, a yield of 1.96%. They've increased their dividend 18% on average over the past five years. Next one is Canadian

National Railway, ticker CNR, 1.5% yield. They've increased their dividend 10.5% over the past five years. And with the recent shakeups at CNR and how they lost on the Kansas City Southern acquisition, I think they'll be returning a lot more money to shareholders. So I really think we'll see that dividend increasing maybe even more over the past years. Next one is Canadian apartment property REITs, ticker CAR.UN. It has a yield of 2.56%. They've increased their dividend 2.5% over the past five years. This one was mainly to get exposure to the real estate housing market. So that's the main reason I put that one in. I know it's a bit lower yield and lower increase in dividend, but it should be a pretty stable name. It's absolutely deserves a spot. It's a rock solid asset. Canadian Department REIT is a good one. Yeah. And that's the beauty with averaging,

right? Doing equal weighted here is you can have some names that will yield a bit more, some that may not increase as fast, but it's the overall result that you're looking at. Next one is a bit controversial, and I'll explain why I put this one in there is Enbridge. So ticker ENB on the Toronto Stock Exchange, it has a yield of 6.98%. It's grown the dividend 10% over the past five years. So the reason I put Enbridge here is to show how you'll probably have to include maybe one name or two that are a bit higher yield or if you want to achieve a yield that's close to four percent the reason why i chose enbridge is i know their payout ratio is very high for the most part it's typically not covered by funds from operation

but they do have a highly regulated business so i do think that they're not too at a risk of cutting the dividend. Maybe they won't be increasing it as fast in the future, but you get that yield a bit more with Enbridge. And that's the reason why I included in there. Look, Enbridge is a fantastic asset. I mean, they basically own a collection of monopolies on the distribution of natural gas. And it's well run. They have a strong capital plan. And yeah, the dividend coverage always concerns me a little bit. They keep doing it. Yeah, they have tons of debt on the balance sheet. But when it comes to stable cash flows, Enbridge has a bunch of monopolies on natural gas. So do what you will with that information. a bunch of monopolies on natural gas. So do what you will with that information.

Yeah, exactly. The next one is Suncor Energy, ticker SU.TO. It yields 5.61%. They actually just doubled their dividend earlier this year, but they had cut it by half because of the pandemic. But right now, oil and gas is just yielding such a high yield for pretty much across the sector. You could use Canadian Natural Resources as a substitute here. Pretty similar yield as well, depending on your preference. It's just an easy way to get some yield. And they're very good businesses. Whether you like oil or not, they're still good businesses. The next one is BCE, ticker BCE.

They yield 5.34%. They've grown their dividend just 4.78% over the past five years, again, as kind of a monopoly. Well, not a monopoly, but a very small number of companies in their sector. They've grown the dividend pretty consistently over the years, so it's an easy play to get a pretty high yield as well. The other one is Telus. Again, same sector, telecom. Telecoms will give you some good yields. So that's an easy way to get yield. You may not get the most growth on capital, but you'll get some good yield out of

those. 6.28% in terms of their average dividend increase over the past five years. Next one, TD Bank yields 3.27%, probably a bit more with their most recent increase. They've grown the dividend 8.41% over the past five years. Everyone knows about TD. I won't go too much in detail. I took the next one, Bank of Nova Scotia. The reason, because it's one of the higher yielders in terms of banks. It also gives you a bit more exposure to Latin America, which is good in terms of diversification. They've grown the dividend 5% over the past five years on average. Next one is RBI, Restaurant Brands International.

Take your QSR on the TSX, 3.65% yield. They own Tim Hortons, Popeye's Chicken, Burger King, and made a few recent acquisitions as well. Firehouse Subs, they bought recently too. There you go. Have you had one, by the way? Have you had a Firehouse Sub? Not yet, but they do have two locations in Ottawa, so it is on my to-do list. My recommendation is order ahead because, yeah, it's delicious, but you literally sit there and wait hungry for 20

minutes while they make your sandwich. I mean, they're making it nice. They're putting lots of meat on it. It's delicious, but order ahead. Yeah. And RBI has grown their dividend a lot over the past five years. So on average, 30%, their compound annual growth rate. Next one is Pepsi. Pepsi ticker PEP. They yield yield 2.68 they've grown their dividends 7.4 over the past five years i like pepsi a bit more than coca-cola just because their balance sheet's a bit nicer similar companies though so i think you can probably interchange pepsi and coke here the last one is another read i probably should have put that a bit higher with the previous REIT, but it's Store Capital Group, ticker STOR. It yields 4.62%. They've grown their dividend 5.5% on average over the past five years. buildings so basically a lot of gas stations and things like that they have triple net leases where essentially the tenant just covers all the costs and they pay the rent to the store capital group

so that one was also an easy one to add to get that yield up a bit more so the total of the yield is not quite four percent but pretty close it's 3.81 percent it's not easy to get a good yield but as you can see it is achie achievable. And I'll talk a bit more about the drawbacks, the advantage of a strategy like this, but also some of the drawbacks of a strategy like this. But I know you want to chime in a little bit first. 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. But there are still so many people who don't even think about hosting on Airbnb or think it's focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. My first thought is, as I like it, my second thought is they certainly, many of them could be interchangeable. If you're listening to this list and you're going, Bank of Nova Scotia, I want Royal Bank instead. It's like, yeah, sure. Very similar investment theses and very similar figures on your yield and dividend growth moving forward as well. A lot of them are rock solid and very defensible, like American Tower, like CN Rail, like Canadian Apartment REIT, like those Brookfield Infrastructure

and Renewable names. Those are really, really solid businesses. And all of these you listed, none of them are just like melting ice cubes that just drip you dividends over time. These are all businesses with strong, durable, competitive advantages and have a future. The world in 10 years from now includes them. They're not melting ice cubes. So I think that that's an important thing to point out. What I was commenting to someone on the Stratosphere Forum yesterday was, if you're looking for dividend yielding stocks, that's great. That's fine. Say you're nearing retirement, you want it, you're switching from your wealth accumulation phase to an income strategy. That's great. That's not something I'm going to do right now,

but that serves a purpose. What I stress to them is just make sure that those companies are wonderful businesses. Is that dividend attached to a good company? Because if you can't answer that question, then there's other options out there. So my comment is I like it. My other one is I have a couple of listed ones here that you didn't have that do pay lower overall dividend yields, but are still very fast growing companies like Microsoft. It does yield less than 1%, but I'd be happy to own it knowing, yeah, you're not getting the yield now, but maybe you are at five, 10 years down the road, you're going to get that yield on cost. Home Depot, a controversial one that we can talk about here is Lockheed Martin is just way too cheap for a extremely durable

business attached at the hip to defense spending across the world. and especially in the US. They're the designer, inventor, and builder of planes, warplanes, missiles, stuff that is not ESG friendly. Yet, every time, investors are like, hmm, our government's going to keep spending more and more money on defense spending every year in the US. And then they're like, yep, they just keep upping the budget in defense spending every year. So Lockheed Martin is another one that you're getting a 3% yield in a great business that can probably grow in the teens still, which is interesting. Starbucks, all of the Canadian banks, and then another one that I've owned in the past, sold it, and thank God because it dropped a lot during the pandemic, which is Allied Property

REIT. I do think at some point, this business is worth a lot more than the future. And an underrated part of Allied Properties REIT, which trades on the TSX, is they do have a lot of infrastructure in data centers in Toronto. So data centers is a big segment for them. And the rest of the market really likes data centers, yet Allied Properties has a pretty big square footage in data centers and the market is discounting it pretty heavily because of their attachment to Office. So just another idea I wanted to throw out there. Yeah. And actually, most of these names, even Allied Property we had considered, I tried to balance as best as I could in terms of diversification. I thought about Microsoft

and Apple. The big issue there is I was trying to achieve close to 4%. And because of that starting yield, I basically decided to get that tech exposure a bit more indirectly, but by using Digital Realty Trust and American Tower Corp. So that's the issue, right? When you're trying to achieve like a higher starting yield, you're probably going to leave out some sectors. And that's one of the big drawbacks of this strategy. But before that, I'll talk about the advantages. These names, as a general rule, should be low beta because they're established businesses. And in a lot of cases, they have moat. So they'll probably be less volatile than high growth names for example well they will they will your returns won't be as high most

likely but they'll be less volatile you will not have to sell actual shares very frequently so you might have two in order to meet minimum lift or riff withdrawal requirements for example but i think that's a big advantage because if you have a portfolio that's not a dividend portfolio and then you need to withdraw funds every year, even if it's going well, sometimes you get into that decision, well, which stock do I start selling, right? It's not an easy thing to decide. So I think that's a plus here. Even if the market crashes, chances are that most of the companies will continue to pay their dividend. It makes you less vulnerable to big drawdowns

because you won't feel like you have to sell because you're getting that dividend payment. It will yield more than bonds unless you get into junk bonds. And obviously, I've talked about bonds before and investing in junk bonds is very risky because then you're starting to invest in companies yet it's their debt but it's not very good companies and there's always an increased risk of defaulting when you look at junk bonds and there's definitely more upside than fixed income including bonds some of the drawbacks or disadvantages, there's a good chance I think you'll underperform like a major index like the S&P 500, especially if the market is rewarding growth stocks. You're leaving out potentially great businesses that pay a small or no dividend.

I mentioned that with Microsoft and Apple, for example. You're underexposed to some sectors, that's pretty clear. And there's more volatility than a portfolio that's heavily weighted into fixed income. The last thing I'm going to mention, another sector that could have been used for some income is pharmaceutical. For example, you can get some decent income. J&J is one of the names. Pfizer. There's mostly in the U.S. these names, but that's another way. You'll probably find some starting yield around like 2% to 3% with those names.

I do think that what you pointed out, which is you're at a good risk of underperforming the S&P 500 benchmark or even the TSX Composite Index benchmark, but that's not the point. That is absolutely not the point here. If you're building a dividend income strategy, making the benchmark the index is very silly. If we look at what has driven returns in the S&P 500 year to date, it's basically five companies drawing all the returns and they're ones that are not included here, which is Microsoft, Nvidia, Google, and Apple. Now, this can be good for folks, like I said, with shorter horizons and they want income. If you are hoping to grow a portfolio for 10 plus years in your working years, then I personally wouldn't buy a list of, which is

basically a list of mature incumbents that are returning capital back to shareholders in a major way via dividends. If you are in a position where you have a long time to invest and earn, but you still want dividend stocks, my suggestion first is maybe strongly reconsider as the best businesses in the world, or even let's look at what I think is the best business in the world, maybe the best business the world has ever seen is trading for 25 times next year's earnings estimate growing quickly is a monopoly and just happens to be named Google and they don't pay a dividend. But if you absolutely want those dividend payments, Stratosphere has a model portfolio of wonderful companies that are still growing, extremely durable, pay appreciating dividends. Check out the dividend appreciation

model portfolio. It's 20 dividend growth stocks that'll give you some yield, but a growing yield. So there's all these different situations into what makes sense for you. And that's the most important part of investing and managing your own money is what makes sense for you. Now, you can use a lot of this stuff as a resource and think about how you want to manage your portfolio. But what works for Simon and I may not work for everyone, but that is perfectly okay. Yeah, exactly. And the one thing I'll mention just to add to that, notice how I did not have any 10% yielders in there. What? You didn't have some MLP that drips you 14% monthly? Come on, Simon, step up your game.

Actually, another comment here is not that it matters, but a lot of the real estate investment trusts do pay monthly yields. They pay monthly distribution. Yeah. And I think that should be in my opinion. You should not pay any attention to that. You should really focus on the company. The frequency of the payment doesn't really matter. As long as you plan your withdrawals accordingly, I think your finance just requires a bit more planning on your end. But if you're solely focusing on monthly dividend payer, you're really limiting even more so your pool, right?

But definitely there's a few in there that will pay a monthly dividend. That's for sure. I just wanted to bring that up. The reason is, is because I know that's why people love real estate. Like real estate as the actual real asset, they're investing in income properties because they like monthly cashflow. And I say, that's great. I love leverage, especially when it comes to real estate. That's why you should invest in real estate. If you are a real estate investor, they'll tell you, well, you can use leverage. It's a beautiful thing. And while I do agree with that, I'm not trying to give myself a job, Simon. I have enough on my plate and income properties

is a job. It's not a job I want. And so I say to people, you can buy Canadian apartment rate, do absolutely nothing, sit on your ass, collect a dividend. And by the way, the stock has appreciated several hundred percent in the past decade. So you're also getting that upside as well. When you look at your total return, you've outpaced even buddy who has made a bunch of money on property in GTA and Vancouver and Ottawa and everywhere, right? Everywhere in this country. So just a quick comment there because I know people do like monthly cash flow. Yeah, exactly. And I think the one thing I like the most about this strategy is that it gives you capital appreciation upside. And I think the best comparison this strategy is that it gives you capital appreciation upside.

And I think the best comparison in the scenario I gave was really traditionally people would have gone mostly to fixed income and fixed income, depending on how interest rates go, there is potential for capital appreciation. Do you mean fixed no income? Exactly. But that's why I think that's one of the big bonuses of this approach but anyways i think we've talked enough about the 15 stock dividend portfolio that i proposed here we'll move on to our last segment of the episode purpose investment launched last week a bitcoin and

ethereum fund that is yielding so it gives you money to hold it. So it actually goes well with the dividend portfolio that I just talked about. So these two ETFs are called Bitcoin Yield ETF. It trades under ticker BTCY-B on the TSX and the Purpose Ethereum Yield ETF, which trades under ticker ETHY-B, again on the TSX. Those are the tickers for the Canadian dollar ETS, but and they are not currency edge. They also have a ticker for currency hedge ones that are denominated in the USD. So the way they are achieving yield here is pretty simple.

It's called a covered call strategy which generates income for the fund. They achieve this by selling call option and getting a premium in return, which allows them to pay the distribution to the fund holders. I've talked about covered calls before on the podcast, and I don't want to go into detail again, so I will link to the show notes the episode where we talked about covered call ETFs. It's the same reasoning, even if it's a Bitcoin ETF in this instance, but they tend to underperform compared to similar ETFs that do not use a covered call strategy. It does reduce the downside a little bit in case of a bear market,

but it also limits the upside because you're forced to sell the asset if the price goes over the strike price for the covered call price. They also tend to have a higher fee than the non-covered call variety. So if you want to learn more about it, like I said, go back to our episode. I'll link it to the show notes, but it's something I wanted to talk about because it made a lot of news headlines last week. Personally, I would not invest with that because I don't like that it limits my upside with these assets, but some people may be interested in it if they want to get some yield out of it. I look at this, sorry if I'm getting savage. I look at this and I go, the world doesn't need this investment product. Why does this exist? Can't people work on something that's

solving a problem? That's just my opinion. I know, I guess this company purpose investment, they're trying to make some money with management fees, but the world doesn't need this, does it, Simon? What is this? Well, yeah. I mean, it's just another fund, right? Regardless if it's a Bitcoin or Ethereum fund, I mean, you can find so many funds out there where you'll kind of scratch your head as to why they were ever created aside from getting assets under management and getting some fees for those company. But they'd made a lot of headlines. So that's why I wanted to include it just so people are aware of what it is. Yeah, well, that makes sense. I mean, everything crypto does catch headlines these days. It's fascinating how much people are very interested in it, even if they have no exposure

to it, which I find even more fascinating. That does it for this show, guys. We have another one to do after this. We're going to push on. Thank you so much for listening to the show. We appreciate you very much. We have had lots of really, really great feedback lately, and we could not thank you enough. If you haven't checked out stratosphereinvesting.com, I highly recommend you do so. If you're looking at this dividend portfolio and thinking, wow, it'd be really nice to have

this in a list. Good thing. It's available for members on stratosphereinvesting.com and you can get it completely for free. No credit card required for 14 days. I'm not going to ask you for your credit card. You can decide on your own if you think it's worth paying money for it after your trial is done. Thank you so much for listening. Appreciate y'all very much. See you in a few days. Peace. 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.