The Canadian Investor - Dividend Income Model Portfolio

Episode Date: November 21, 2022

Simon goes over an updated version of a model dividend income portfolio. The stocks that you will find in the model portfolio are companies that provide a good starting yield, have reasonable payout ratios, have revenue growth and dividend growth.  Tickers of stocks discussed: BEPC.TO, BIPC.TO, DLR, GRT-UN.TO, CNR.TO, CNQ.TO, TXN, O, HD, RY.TO, TD.TO, T.TO, JNJ, PEP, FTS.TO, PSU-U.TO, COST, MSFT, V, EQIX, ASML, TFII.TO, CP.TO, GFL.TO, BAM-A.TO, ATD.TO Shakepay Bitcoin Survey 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. How we doing? Today is November 16th. Welcome into the show. My name is Brayden Dennis, as always joined by the man, the myth, the legend, Simon Bélanger. Today, we have an episode I know many of you will love because, hey, Canadians love those divvies. They love the dividends, and for many cases,

good reasons. And so, you are going to unveil the portfolio that you built for join tci.com for those looking for income maybe at the retirement stage you know this idea started from you building it something similar for your parents yeah that's it and i'll approach it each time so i'll probably just you know each time i i provide an update i'll try to do it quarterly i know a lot of people have been asking for this. And the way I'm going to just approach it is as if I was retiring myself kind of right now. So not looking at five years in the future, just really right now and every quarter, I'll just, you know, probably change a few names just depending on how some of the names have fared. And the goal here is to achieve as close as possible to 4% dividend just because going a bit

on the 4% withdrawal rule when you retire but I am kind of incorporating some flexibility in there and I'll go into a bit more detail towards the end but that's the main goal but obviously as the markets move when I update it every, there might be some names that go in and out, but I think there probably will be some names that stay there more often than not. Yeah, I think that's a good call. It's kind of a set it and forget it with the old blue chips, but these are high yielding blue chips and it looks like you've equally weighted them. Yeah. Before we do that, I just thought I saw something interesting on the old internets before

we get into the model portfolio. And it is Focus Investors Five Golden Rules. And the source here is the Warren Buffett portfolio, Mastering the Power of Focus Investment Strategy. I guess this is some book. I have not read it, but these are the five golden rules from the book. Number one, and I thought these were interesting because not only are they timely and it forces us to zoom out, right? There's so much short-term pessimism that happens in the stock market on a regular basis. So, this is an important zoom out and I am enticed to read the full book. Number one, concentrate your investments in outstanding companies run by

strong management. It seems pretty self-explanatory. Number two, limit yourself to the number of companies you can truly understand. 10 is a good number. More than 20 is asking for trouble. 10 is a good number. More than 20 is asking for trouble. You and I agree with this. I mean, the number, I mean, you can debate it all day, but you got to focus on a number of companies that you have the bandwidth to understand. If that's only five, if that's only 10, then maybe you do that and then just own a broad-based index with the rest of your portfolio. That's probably what most people should do if they have limited bandwidth to understand a number of companies. You aligned on this? Yeah. Yeah. And I'm glad you kind of clarified, you know, if you want to just own five,

but then complement it with a portfolio of broad-based index funds, I think that's great. I kind of do that myself just because I probably – I definitely have more than five individual holdings, but I do like to complement it. Because having just five holdings and nothing else, that's like extremely concentrated. So, just so people kind of understand the nuance there too. And I haven't done it, but I've been talking about it and I want to do it and you kind of gave me this idea. about it and I want to do it. And you kind of gave me this idea. Whereas in falling bear markets, when we saw what the NASDAQ finisher with S&P lowest point peak to trough was down like 27% or something. That's just a... If I don't have any amazing screaming ideas popping out at me and I want to deploy money in the market, it's like, just buy an index fund. Buy this ETF for zero cost, and then either deploy it to some individual name I have a lot

of conviction in, or just keep DCA-ing into it. I think that that is an easy way to take the emotion out of buying stocks on sale. And so I agree with that. Number three, pick the very best of your good companies and put the bulk of your investment there. This is basically just saying like match your conviction and the waiting, right? Like if you have a name that you want to keep adding to it, just keep doing. You're not arbitrarily constrained like a lot of fund managers are. I think that that's where the like really long-term performance can come from. Number four, think long-term, five to 10 years minimum. Also pretty self-explanatory.

And I wholeheartedly agree. Five to 10 years minimum when you're thinking of buying a stock. The old Buffett says he wouldn't own a stock for 10 minutes that he wouldn't own for 10 years. That's a good mental model. Whether or not that you actually execute on that, that's a good mental model. And number five, this is just four words. I love it. Volatility happens, carry on. Volatility happens, carry on. That's the fifth one. I love it. Few words and powerful outcomes and powerful mental

models here. Yeah. I feel like five could almost be like volatility is uncomfortable, get comfortable with that. Something like that. Yeah. Yeah. Well, whatever it is, right? It's the notion of it happens, it's going to happen, it's happening now, it's going to happen again in the future. It will always happen. So, get used to it and carry on. Yeah. No, exactly. So, I guess now we'll move on to the portfolio. Yeah. Let's talk about this. Yeah, no, exactly. So I guess now we'll move on to the portfolio. Yeah, let's talk about this. Yeah, drum roll. Yeah. Do we want to go through each name and I comment on it or are we going to be here all day

if we do that? What do you think? Yeah. So I think I'll basically start, give all the names and then we can just comment on. I just put a couple points for each because obviously, you know, it's going to take a whole day like you just said, if we do that. So I'll just kind of... Some I'll have no thoughts on, some I'll have lots of thoughts on. So we'll just roll with that. So I'll just kind of go through the goals here quickly. So dividend retirement income portfolio, like I mentioned early on,

to provide most of the income from the dividends, get as close to 4% average yield as possible. Stocks that have a sustainable- Can I stop you there? Why 4%? Other than the 4% rule, which maybe you can reiterate again now, but why 4% just in general? Why does that number feel right to you? And it's a number that's used a lot for like a goal for income.

Yeah. And so there are a couple of reasons. The first one, which has some limitations, couple reasons. The first one, which has some limitations, a 4% rule, meaning that you can essentially, you know, when you're retired, withdraw 4% of your portfolio and be able to sustain yourself at retirement. However, I do like a, I read a kind of not paper, but an article quite lengthy on Vanguard, and I can try to search it and find it. I can always post it on Twitter, where they looked at a more of a hybrid approach, right? So you kind of withdraw anywhere between two, 2.5%, two, five and a half, 6% of your portfolio, depending on your needs, on the cost for a given year, maybe a year you go for, you take a big trip, the next year you don't and so on. So having some more flexibility and they found that that was something that could

be sustainable. So not having kind of a hard set 4% rule, but having more of a bracket. And that's kind of the approach I went. So that's the 4% kind of sits in that middle here. So, that's the logic behind it. Gotcha. And it's also, to me, a kind of line in the sand where you can find lots of 4% safe yields. Look at the banks, right? Yeah. I mean, historically, they've maintained that 4% dividend yield. Beyond that, you get into value trap alarm bells, start seeing potential David N safety alarm bells. Of course, nuance case by case.

But generally, once you go into the 5 plus 6%, it's either a very unloved sector paying that yield, or it's just a pure play income play with maybe no capital appreciation. So that's why 4% is also important as well. It's a bit of a delineation between respectable high yielders and potential value traps. Yeah, yeah, exactly. So like you alluded to, the stocks have to have a sustainable dividend. And that's really important if you're counting on that for income. Now, dividends that have grown, I was trying to get also some companies that had, you know, try to get that 4% average yield plus a dividend that has shown some growth in the past five years. It doesn't have to be huge growth. And I know you'll talk about some names afterwards that offer a smaller dividend, but more growth. But the case

here was to have a pretty good base dividend and some growth next to it and obviously I wanted to have some revenue growth as well because if the company's not growing chances are that you know the dividend may be in jeopardy at some point in the future and with the dividend being sustainable having a cash flow payout ratio that is sustainable for the most part I would use free cash flow, but FFO funds from operation is the most useful metric when looking at REITs or utility type businesses. I did not have the chance to look at every single business for the payout ratio. So obviously this is just, you know, an example of a portfolio. So if you like these names, I would say one of the things you need to do

if you're using it as a dividend play is definitely make sure that payout ratio is sustainable and they have a history of a sustainable payout ratio too. Yeah. I mean, this is a major point of contention if you're looking at high yielders. It's just how much of their free cash flow or what you can readily find available on payout ratio will use net income. So ideally use free cash flow, but if not, you're just checking the payout ratio on most financial data sites, you'll see it in net income. And this just gives you an idea of how much of profits are being dished out to pay the dividend. And the higher the number that is, is just a higher percentage of profits going to pay out the dividend. So,

if the number is lower, it's typically safer and they have room to keep growing it. That's basically the gist of it. Yeah. And it'll vary from industry to industry. So, don't start looking at Apple, probably has, I don't know, I don't know by heart, but around what like 20%, 15% payout ratio and compare it to, let's just say a Granite real estate investment trust. Like it's obviously Granite is going to have a way higher payout ratio. A big chunk of your returns with Granite will be that, whereas Apple, it's just going to be a little boost to your returns. That's about it. REITs are required to be a REIT structure to pay out over 90% of distributable earnings, right? So yeah. So yeah, if you see a utility paying out, I'm pretty sure the telcos pay at like 80%. Yeah, they're way up there.

Roughly? Yeah. But I mean, these are very stable oligopolies with recurring cash flows. So that's not like some high-flying tech stock that pays some wonky dividend. Those are not the same. 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. Bestrade.com. So not so long ago, self-directed investors caught wind of the power of low-cost index investing. Once just a secret for the personal finance gurus is now common knowledge for Canadians, and we are better for it. When BMO ETFs reached out to work with the podcast, I honestly was not prepared for what I was about to see because

the lineup of ETFs has everything I was looking for. Low fees, an incredibly robust suite, and truly something for every investor. And here we are with this iconic Canadian brand in the asset management world, while folks online are regularly discussing and buying ETF tickers from asset managers in the US. Let's just look at ZEQT, for example, the BMO All Equity ETF. One single ETF, you get globally diversified equities. So easy way for Canadians to get global stock exposure with one ticker. Keeps it simple yet incredibly low cost and effective. Very impressed with what BMO has built in their ETF business. And if you are an index investor and haven't checked out their listings, I highly recommend it. I bet you'll be as pleasantly surprised as I was that BMO,

the Canadian bank is delivering these amazing ETF products. Please check out the link in the description of today's episode for full disclaimers and more information. So I'll say now all the names in order, like you said, they're all equally weighted except one. I'll say the yield, obviously the markets have been moving a lot. So we talked about volatility, so that's been the case. And then we'll I'll just go over each name, just a few points here to try to keep this not too long, because we have another segment after this. So the first two names are Brookfield Renewable Partners and Brookfield Infrastructure Partners, 5% weighting each dividend yield for the renewable partners is 4.11%. And infrastructure partners is 4.11% and infrastructure partners is 3.28%. And I actually use the corporation one, so you can get a higher yield if you use the limited partnerships. The reason I took the

corporation here is just because it's friendlier to some types of accounts that are not like TFSA and RRSP. Digital Realty Trust, ticker DLR, again, 5%. This one, 4.3% dividend yield. And I'll just say they're all 5% except one. So I'll just say the weighting. I'll stop saying it here. Granite Reap, like I mentioned, GRT-UN, 3.96% dividend yield. Canadian National Railway, 1.81% dividend yield. Canadian National Resources, 4.14% dividend. Texas Instrument,

2.76% dividend. And I'm skipping some tickers here. I'll put them in the show notes, so not to worry. Realty Income, 4.58%. Home Depot, 2.4%. Royal Bank, 3.89%. TELUS, 4.84%, J&J or Johnson & Johnson 2.67%, Pepsi 2.58%, TD 4.03%, Fortis 4.23%. stocks because yields are so high right now because of higher interest rates. I think it's just a great opportunity for retirees to be able to have that and actually be fairly close to inflation. So I have 10%. This is where it's not equally weighted in the Purpose US cash fund, yielding 4.04% in interest rates. These are essentially money market fund. So essentially, it's almost like a savings account if you'd like. And then I have 5% each in a one-year GIC, two-year GIC, and three-year GIC. They're yielding all above 5% right now with our sponsor EQ Bank,

but it's pretty typical now. They're typically at the top in terms of GICs. I mean, if they're not the top rate, they're usually first or second, and then they go back at the top in terms of GICs. I mean, if they're not the top rate, they're usually first or second and then they go back to the top. I love this one year GIC at 5.1%. I mean, if you told me I would say those words on this podcast last year, I would have told you, you are full of shite. And here we go. What a difference change in rates can make. No, I like this. I like this overall. I mean, it's obviously balanced. You have 15, 20, you have 25% of the portfolio and essentially cash or fixed income. And so that's one thing to speak of. And then yeah, you got the rails, Canadian bank,

consumer staples, infrastructure plays, utility. Let me look here. Like something as stable as a retail play like Home Depot, which I don't care about their financials. Have you walked in there and just smelled Home Depot? No, I think this is good, man. This is solid. And I tried to, and I think you can tell, I tried to diversify as much as I could. Obviously, if I wanted to be overweight, like certain sectors, like, you know, banks, for example, utilities would be another example here. And REITs, if I did like banks, REITs, utilities, I'd probably be closer to five, five and a half percent in terms of average yield. So keep that in mind mind. But I have some tech plays here as well. I do have, like you said, some consumer discretionary and so on and non-discretionary. So, I think it's a

pretty good balance and that was one of the things I wanted to do. And even with this, it's important to recognize this yield is averaging out at 3.84% on the portfolio, which is obviously a nice income on any portfolio for these high-quality names. But no equity is safe from the volatility and potential capital loss. Like look what happened with Algonquin Power. Yeah, exactly. A safe high-yielder utility that has poorly managed capital, I'd say. And so none of these names are safe from large equity drawdowns on the market. And none of them are safe from the laws of capitalism. So it's just important to remember that some of these

blue chips are not safe havens, but of course, they're going to have less volatility than the market and overall less business risk than the average company on the market. That's the whole point of the old blue chip. Yeah, exactly. Now, I'll go a few points every name and I will talk about, again, the cash and the GICs, the reasoning behind those. So, BIPBP, the reason I chose this over BAM is really simple. It's because they're yielding higher starting yield. It's very possible over the long term that BAM will outperform these two very well aware of that, but that's not the goal here. They consistently, they have a dividend policy to increase it between 5% and 9% every year.

Now, just a little footnote here. If you look at their five-year dividend growth, it can be misleading. It's because they've had some stock splits. So it looks like extremely low. That's because they don't factor in the stock splits in the calculation. So it looks almost flat. It has not been flat if you factor in for those. They're great at deploying capital. They could see some slower growth though in the coming years because of higher interest rates. And that's a risk just to be aware here. Now the next one,

DLR, so Digital Realty Trust, one of the largest players in the data reach center. My preferred play here is Equinix. But again, the goal here is to get as close to four percent as i could and dlr as a much higher yield than its bigger brother equinix i would say they could see some headwinds from supply chain issues related to semiconductors and as well interest rates but overall i mean i'm not too concerned too concerned that the dividend would be in jeopardy and it will most likely keep growing. They have a pretty strong history as well at growing the dividend. It's funny because after this, I'm going to give a quick list of some Canadian and US names that I think are more dividend growth names, like you get more capital appreciation. And in the first

list, I'd prefer to own BAM for that reason. And in the second one here, I prefer to own Equinix for the reasons that you've listened here as well. That's not... The reason I'm saying this is not because, oh, I think that they're so much better, is that I think that they serve different purposes in terms of what game you're playing. And I am not entering retirement. So, it's a different game, right? Like, that's the whole point of this portfolio. Exactly. Now the next one is a REIT, the FERT REITs on the list. So Granite REIT, one that I own personally, conservative FFO payout ratio for REITs. So it's in the mid 70s, low mid 70s, low leverage compared to a lot of its peers, high occupancy level. And one thing

to be aware, and i'll try to add some downside as well as much as i can because it's all you know not all positives for all these names but they have more than 20 of revenues dependent on magna international something to keep in mind you know if something happens to magna it could really impact their revenues here they have been you know narrowing that more and more. It's becoming less and less in terms of percentage over the years. It used to be the vast majority of revenues a decade ago, overwhelmingly the vast majority. So that's still trending the right direction, but I do like this play and offers a pretty good yield. It's been pretty beaten down

in the past couple of months. Offering a chance to own another high quality industrial REIT again here. I mean, of course, all of these names have been hit pretty heavily from rising rates like most REITs do. But this one's a high quality one, good, well-managed one, big spinoff from Magna quite a while ago. Now you've seen the kind of divesture from their concentration risk in Magna. And I think that industrial REITs are typically good businesses overall. Yeah, no, I totally agree. Now, the next one, I wanted to put one of the railways in here.

I always come back to Canadian National Rail here just because it has a higher yield than CP. It's one of two railways in Canada, has a strong network. It ranges from east to west in Canada, all the way to the Gulf of Mexico in the US. One of the reasons why they had no shots at buying Kansas City Southern is because their network was already so extensive. They're dependent on the strength of commodities and the economy. So something to keep in mind. So if you see a drop in that could definitely impact their revenues. It will grow slower than cp especially if you factor in the kansas city southern acquisition but new leadership since the start of this year will be returning more capital to shareholders so thankfully that kansas city southern acquisition did not go through so that's

why it's a really interesting play because I can just see even though the starting dividend is lower here compared to other names, I think they'll be growing it double digits for the foreseeable future. So it could go pretty quickly here. It's infrastructure that's been in the ground for 100 and going to be in the ground for another 100. So not much else to comment here. Yeah, the next one is Texas Instruments. I know one of my follows on Twitter, the dividend guy, a fellow French Canadian. Sorry, I'm missing his name here, but I'm sure he'll tweet at me after he listens to this. But he's been big on Texas Instruments. And the more I look into it, the more I think it's a really interesting dividend play.

So it has a fairly high dividend for a tech company, but not high to the point that you would look at it and say, oh boy, is there some big issues going on with this company? It is a more mature company, but 19 consecutive years of raising their dividend. And it's the largest producer of analog semiconductor chips in the world. So these are kind of real world uses. They're not chips that would go in like computer systems.

So they're different. And there are competitors, but they have steadily grown their percentage of that over the years. So definitely a very interesting play to have some tech exposure here. I like it. Great business.

Absolutely wonderful business. And I didn't realize they had raised the dividend 19 times. And you just mentioned, shout out Mike. I know he's listening to the pod. And I had the pleasure of meeting him. He's a great guy. Great energy. Awesome energy. I like the way he rolls. Shout out Mike. Yeah. I should know his name. He's also French. I'm sure I don't hear about it, but that's okay. So, the next one here. It's not like, you know, like, oh, because he's French-Canadian, you're French-Canadian. You guys just like have to know each other. Everyone in Quebec knows each other by first name, of course, right?

And I'm like notoriously terrible at names. Like, I'm so bad with names too. I recognize people's faces. Like, I have really good ability to do that. But names, I'm terrible. Now, the next one here, Realty Income. This is a really interesting retail REIT. The reason why I like it is their top tenants are grocers, convenience stores, and dollar stores. They're very big in the US. They have triple net leases. Triple net lease essentially means that the tenant

pays for pretty much everything, whether it's the maintenance of the building itself, if they need to do certain modifications, taxes, things like that. That's what a triple net lease is. So it's a very good business model. They grew their dividend at a 4.4% compound annual growth weight since 1994. So it's not going to blow you out of the water, but I think it's going to provide a steady dividend. And it's yielding pretty nicely here. I'm just going on the information I had. So 4.58% is a pretty good one. Now the next one you talked about at Home Depot. I don't think I need to go too much in detail here. I mean, it's a leader in home

renovation construction material, provides exposure to the construction market. It's more stable than publicly listed U.S. home builders. It could face some headwinds if there's a significant slowdown in construction, nonetheless. So keep that in mind because the pro side is a pretty big portion of their revenues. But I mean, even if there's a big slowdown there, I think it will be able to weather the storm quite well. And it would need to have something pretty catastrophic for them to cut their dividend. There's a book that I want to read that is, I think, recently come out that describes the life and the story of the

founding of Home Depot with the founder written closely with the author. And it sounds badass. It just sounds like a very unconventional and badass story because I'm pretty sure he started it in his 50s or something. Hold on. Let me verify that while you go on to the next one. So, the next two, I put them together, Royal Bank and TD and TD so this in my view I'm not super big on banks and I know them decently well but these I think are two of the better Canadian banks obviously part of the big six they're actually the the two largest Royal Bank for me gets revenues from several segments so it's not as reliant on retail banking as other banks. And although TD is primarily a retail bank, it has significant part of its revenues coming from the US, which makes it less reliant on Canada

than other Canadian banks. So that's the reason, the reasoning behind I went with these two over some of the other names in this space. Did you find what you were looking for? I'm still looking. I was hoping you'd keep talking. I saw the thumbs up as I was about to say that, but that's okay. Yeah. Bernie Marcus and Arthur Blank founded the company. Hold on while I figure out and verify how old Bernie Marcus was when he started it. Okay.

I'll keep going. 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. So not so long ago, self-directed investors caught wind of the power of low-cost index investing. Once just a secret for the personal finance gurus is now common knowledge for Canadians, and we are better for it. When BMO ETFs reached out to work with the podcast, I honestly was not prepared for what I was about to see, because the lineup of ETFs has everything I was looking for. Low fees, an incredibly robust suite, and truly something for every investor. And here we are with this iconic Canadian brand in the

asset management world. Well, folks online are regularly discussing and buying ETF tickers from asset managers in the US. Let's just look at ZEQT, for example, the BMO All Equity ETF. One single ETF, you get globally diversified equities. So easy way for Canadians to get global stock exposure with one ticker. Keeps it simple, yet incredibly low cost and effective. Very impressed with what BMO has built in their ETF business. And if you are an index investor and haven't checked out their listings, I highly recommend it. I bet you'll be as pleasantly surprised as I was that BMO, the Canadian bank, is delivering these amazing ETF products. Please check out the link in the description of today's episode for full disclaimers and more information. disclaimers and more information. The next name here is Telus. So I chose Telus over Bell because mainly Telus does not have a legacy business like BCE. Rogers was not even part of my thought

process because they seem to, you know, step in, you know, I'll just say it and poo whenever they have the chance. It's like, you know. No, but it's true. If there's a playbook on making mistakes as a telecom, I think Rogers would need to write it. That's how bad I think it is for them. Now, tell us what I like about them is they don't have, like I said, the legacy business like Bell does. But also, they provide some exposure to the healthcare space. And this is something their competitors don't. So it gives me a little bit of exposure to that within these names,

along with my next name here, Johnson & Johnson. No, that's good. I think Telus has been a good capital allocator of the big three telcos. I think probably the best. And I don't have any real hot takes on any of them other than lots of hot takes on Rogers now that I say about it. But Rogers and Toss, I don't have any really spicy takes between them. All right, here it is. He founded the business. This is Bernard Marcus founded Home Depot. He co-founded it at age 50 and retired as chairman in 2002.

So these businesses that you find that are like founded, you know, at the tail end of someone's career, it's an awesome story and motivating for people who are like not entrepreneurs but want to be and think, you know, oh, you know, I got kids. It's later in life. You know, I can't start a company. I got kids, it's later in life, I can't start a company. And look, Home Depot was started by a 50-year-old and what is it? Like 90% of Warren Buffett's wealth came after the age of 65. It's not too late. This is just my motivation from me, an entrepreneur to potential entrepreneur in the future. Take it from me. I mean, most of my mistakes in my 20s. So now in my 30s, I feel like I'm doing better moves. Obviously, I'm not 50. You're a wise father now. I'm wisening up. Yeah, exactly. So the next name here, I alluded to it. So Johnson & Johnson, obviously the ticker J&J, something that you'll probably hear a lot whenever someone's talking about them. They provide some exposure to the healthcare space.

So don't have any other exposure aside from Telus here. Note that J&J will be spinning off its consumer business, which will be called Kenview. I'm not sure exactly when. I know it's coming soon. And Johnson & Johnson will be focusing on its pharmaceutical business. So if you own this name, you'll own both company, I'm assuming. I haven't looked into the whole spinoff, but I'm just assuming if you own shares, you'll keep owning J&J and you'll get shares of that Kenview company. This is maybe blue chip of... This is the

big dog of blue chips. This is the king of blue chips. Pretty much in every index fund. Yeah. You Google blue chip and the J&J logo comes up. Yeah, pretty much. Without its issues, right, there's been some lawsuits the past couple of years, I think, about like the baby powder amongst other things and stuff like that. But, you know, I think overall, it should have a pretty sustainable dividend. Classic new dad. Yes. Into finding all the lawsuits on baby powder. It made headlines quite a bit, even before I knew I was going to become a dad. But I digress next here. A utility. I know people will like this one. I know it's a very popular play in Canada. So for this, this one, I would have to do a bit more research. But what I've read, the limited reading I did is it seems to be one of

the safest and better managed utilities available in Canada. Seems to be very conservative in terms of, you know, making sure they're prepared for the worst type of deal. It has raised its dividend 49 consecutive years, which is really impressive. Holy smokes. Yeah, it's really impressive. I mean, in the U.S., that would be considered a dividend king once it reached 50. So they're pretty close to that. I think they have to be in this s&p 500 but regardless it's impressive especially since it spans over some periods of economic uncertainty

and of course the great financial crisis so the fact that they were able to raise it i don't know by how much maybe they just didn't kind of a token, a courtesy raise, but they still raised it and they never cut it, which is impressive. And they have a target of 4% to 6% dividend growth per year from now until 2027, which is pretty good considering they pay above 4% already. Yeah. So, like a dividend aristocrat is 25 years. So, yeah, they're one year out. I mean, despite – they'd probably be in the S&P five. I don't know. I think they're not. Whatever. Splitting hairs. But yeah, 50 years of a dividend increase puts it in an elite class of like less

than 50 businesses, I'd probably guess. Yeah, there's already not that many as dividend aristocrats. So, dividend king is quite something. So, I think this one, I think you're saved that. Apparently, there's 41 stocks that are Dividend Kings as of today. So, it puts it in a very elite group. You get like a lot of the consumer staples. It's like you go to your buddy, you're like, I need a blue chip. And he's like, say no more fam and gives you shares of Procter & Gamble and Johnson & Johnson. So, talking about a pretty exclusive list here. That's it. And now the last of the stocks here is Pepsi. So I prefer this one over Coca-Cola

because Lays has been a big driver in sales for them. And they've really shown a resiliency like Coca-Cola and other consumer staples where in the face of inflation they've been able to keep their margins pretty intact and raise prices so it's something very attractive here the payout ratio I think I had looked at it I think it's around like 80% but a company like Pepsi is not something that I'd be really alarmed about could be a bit lower or higher just going on memory here when I checked but I think it's a good play I don't think it's going anywhere anytime soon and provides a decent starting dividend too. I think in the mid 2%. Dude, Frito-Lay is a sneaky great asset.

Yeah, it is. Very sneaky great asset. People love chips and that ain't changing anytime soon. Frito-Lay is a great asset. And if you look at the segment breakdown on Pepsi, Frito-Lay is like a growth stock, man. Oh yeah, it's doing. It's been a great addition to their portfolio. And I think that's probably the reason you'd own them over Coca-Cola if you prefer Pepsi.

Yeah. I don't prefer the drink, but I think I might prefer the stock because of Frito-Lay. I'm agnostic. I really don't care. It tastes all the same to me. I put it with rum, so it tastes all the same. Yeah, yeah.

Tastes the same once it's about 80% rum. Yeah, that's it. And now the last two here, they're not stocks, obviously. So the Purpose US Cash Fund, this is essentially a savings account in US dollars. The reason why I picked this is because you can also have it in Canadian dollars if you wanted, but I like the USD. They both yield in terms of interest rate around 4%. And it gives you exposure a bit outside of Canada. So not having that currency exposures, the US is a reserve currency. So that's why I like having this 10% here. And it's really useful

because of what we were talking earlier, that kind of 2.5 to 6, 6.5% range where you may need funds to just sustain your expenses from a year to year basis. Well, this is meant for that. So this gives you that buffer.'s super liquid it's not locked in you can just sell it very quickly and get the money I mean you sell it you withdraw your money you get it within our day or two depending how long your broker takes to transfer to your bank account so this has a lot of flexibility and with 4% I think you'd be you know it's kind of reckless to not have something like that in your portfolio given

the interest rates we're seeing and then on the other hand the GIC so all three of them are 15% together they're offering I think it's 5.05 I checked this morning they lowered it a little bit at EQ Bank but they're all offering over 5% and the reason why I did one year two year three year is just to stagger them and And every year one matures. And you can decide at that point whether you want to reinvest that money in a GIC and keep on staggering or potentially using the money if you need that additional cash infusion. The staggered way, it's great because they're locked in. So every year you get that extra 5% unlocking. it's great because they're locked in. So every year you get that extra 5% unlocking. And then you can just decide when it unlocks what the best course of action is for your portfolio at that

point. I feel like I'm the guy at the end of when you watch some pharmaceutical company and they list out like 37 side effects. Rates are subject to change here. Our sponsor at EQ Bank is going to kill us if we don't say that. These GICs are subject to change.. Our sponsor at EQ Bank is going to kill us if we don't say that. These GACs are subject to change. But today, at point in time, yeah, like over 5% on these GACs. That's pretty solid. We're not just saying that because they're a sponsor. It's a good option, man. Like I said, I didn't think I would be saying that. If I heard myself say that on the podcast a year ago, I would have thought I was literally on some serious drugs. So this is good, man. One more disclaimer is that none of this is financial advice.

Do your own research with every single name listed here before you enter a security. Don't follow anyone. Don't follow us into trades without understanding the business and understand that there is volatility on every single stock. So just be aware of that. Well said. and that understand that there is volatility on every single stock. So just be aware of that. Well said. This is good, man. I like this. I like the idea of a 4% yield for, or just under, 3.8%. It feels nice, feels right for an income portfolio. And look, these are not crummy businesses. I like some of them a lot more than others, but some of them are really nice businesses. Yeah, no, exactly. And I'll post it on JoinTCI, so the members there.

Obviously, we've said all along we won't be doing a paywall, so we talk about it on the podcast. But I'll have a bit more detail, some point forms, and the compound annual growth rate that the companies have seen in terms of dividend growth, because I think that's pretty useful as well. Would have made a pretty long episode if I went through everything. On stratosphere.io, we're building the chart to have a toggle where you can do total return as well to include all dividends over time, which is just really damn hard to find. So it's kind of complicated to build out. So we're going to have that on November 29th, baby. All right. I'm going to just do my quick runners up for a dividend growth ideas because some people are looking for income. Some people are looking for a bit of both and more total capital appreciation. Just to weigh this discussion.

I have five US names, five Canadian names. We're not going to go through them. I don't have enough time, but here's some ideas. Every single name I will list here, both on the US and Canadian side, have achieved over 10% dividend growth on average over the past five years. And they're what I think is very high quality, especially on these US names. Here we go. Costco, ticker COST. Microsoft, ticker MSFT. Visa, ticker V. Equinix, ticker EQIX. And ASML, ticker ASML. On the Canadian side, we have TFI International, ticker TFII. And then I have CP Rail instead of CN here. GFL, ticker GFL. Brookfield Asset Management, ticker BAM. On the Canadian side, it's ticker BAM slash A or dash A. And then Alimentation Couchetard, please say that one for me. Alimentation Couchetard.

I love it. It just rings so nice. Thank you. That is ticker ATD.B, which has been a sneaky compounder and a sneaky dividend growth stock. Just strictly out of, you can't buy it on a US exchange too, which is nice. I like that because you're going to be less crowded into the name just naturally. All right, let's keep going with today's show. Wow, we're talking about so many stocks today. Wow, this is incredible. Let's do a favorite segment of the show called Stocks on Our Watchlist presented by our friends. Ekey Bank's getting lots of exposure today and we are talking a lot of stocks. So Ekey Bank, the beautiful people over there, you're welcome.

We love you and you're welcome for this wonderful exposure for you. All right. Do you want to go first? Yeah, I'm going to stick to the dividend team here. So I chose... Yeah, you really are. Yeah, I chose a name that actually came to mind again that shout out beaten up yeah beaten up is it still beaten up

oh yeah it's more beaten up even more oh wow oh this got beat up i sold it and then it got taken to the woodshed thank goodness i sold it but i do like it here now yeah it's actually really interesting so i got the inspiration from both Mike, who I talked about before, but also our friends Dan and Nick at the Canadian Real Estate Investor Podcast. So their latest episode about, I think it's understanding or breaking your mortgage. I probably butchering the title here. I'm sorry guys, but they talk quickly about Allied Property REIT. And I'm like, you know what? I'll have a quick look here. And there's a lot of intriguing things. So it's a small company listed in Canada, market cap of $3.3 billion.

It's currently yielding just shy of 7%. Now, 70% of Allied assets are in office REITs, with 17% being in urban data centers, 9% in retail, and 4 percent in parking real estate so primarily office REIT but not only that so a bit more exposure than that now I'll just talk about this dividend the seven percent so as soon as you see something that high even for a REIT this is starting to be on the higher end for a REIT you know it's not like a tech play where I see alarm bells going on left right and center but a REIT it's know, it's not like a tech play where I see alarm bells going on left, right and center. But a REIT, it's on the higher side. So it's on my watch list, but I still need to do due diligence. But here's some of the stuff I found out. So now the reason why I find Allied

intriguing is because we're still on the backdrop of COVID. Lots of people are still working from home in some fashion, whether it's fully remote or a hybrid model. 80% of its rental square footage is in Montreal and Toronto, with the rest spread out between In Order, Calgary, Vancouver, Kitchener, and Ottawa. The occupancy rate is, you know, it could be better. It's in the low 90s. It definitely could improve. I think clearly they've been impacted by the COVID trend here. But for example, I talked about Granite, which I own Granite as an occupancy rate around 98%. So just to give a contrast here, they have 1 million square foot in development coming to their portfolio, the rental portfolio between now and 2025. And 78% of it has been pre-leased.

Although I don't know to what extent, even if it's pre-leased, whether the lesser can actually get out of it. So I'm sure there's kind of ways for them to get out of that. I'm not an expert, but it's still good. 78% of it being pre-leased. And for context, their current portfolio is 15.5 million square foot so 1 million is still a decent addition over the next several years their FFO so funds from operation is a bit down year over year but has been stable on a sequential basis which is definitely good news

here and the dividend does look safe at least for now they have a payout ratio from FFO of 71.1%, which is flat year over year. They've increased their dividend essentially at 3% clip annually over the last five years. So they've increased it a little bit, not a lot. So the last thing I check here is the interest expense has stayed relatively stable. It's gone up a little bit if you exclude financing prepayment costs. So it has gone up a bit. But overall, I mean, it's a very intriguing play. I need to do more research here. But you know, this is a play where you'd invest here if you believe that, you know, maybe longer term at some point, we'll be returning more and more to the office.

I don't think it's happening in the next couple of years. I think it will be returning more and more to the office. I don't think it's happening in the next couple of years. I think it will be gradual. I think it's something that's going to be gradual over time. I think the hybrid work model will be staying in place for a lot of businesses. But I also think a lot of businesses that maybe are fully remote will be transitioning to hybrid model. So I think there's going to be slowly some increased demand after being hard hit by COVID. This is a bet on Toronto and oh my goodness, this thing's been

crushed up to – They have more leaseable in Montreal actually. More? Yeah, slightly more. Yeah, just Montreal and Toronto are by far the two biggest but Montreal is actually a bit more than Toronto. Really? Yeah, I was surprised too because talking to you, I thought Toronto was their primary. So, if you – next time you come to Toronto and come hang out with me, please come hang out with me. Just walk down King Street. Like they own King Street.

Like every – and if you're in Toronto, my friends listening in Toronto or next time you're down in Toronto, if you're walking on either Adelaide or King, the two downtown streets that run east-west, despite not Front Street, but the two north of those, you will see a little placard. It's very hard to notice, but if you're looking for it, you'll see a placard right beside the door that'll have Allied's logo. It literally says Allied in all caps. And I didn't know that about Montreal. I probably should because I owned it for a hot second there. But I think that at this price, I mean, these are good assets. These are

not junky assets. And I get it's office and I get that there's some questions there. But one thing I would for sure want to understand the full story, this is, I guess, me to you. Before you think about purchasing this thing, try to dig and then please let me know what's happening and what the status update of the well development downtown is. It is a joint venture downtown, five towers, front and spadina, I believe. It's five towers, joint venture with Rio Can and Allied. And this thing's going to be a beast. I think Shopify had like one of the entire towers before they decided to... Like there's just some question marks around tenancy there. Yeah.

So, I would... Oh, wow. Actually... I would look into that. It's funny you mentioned that. So, when I was looking at their development pipeline, I stayed on that page for the investor presentation. And the well is actually expected between Q3 2022 and Q4 2023. Yeah, it's almost done. Yeah. So I think they're probably starting to get it rentable.

It's 98% pre-leased. So it looks like... I just think that people like... I don't know what the like legally what people are able to drop out of. But I just know that the people who signed these big deals to be in the fancy new five tower development, the well downtown was before people all get sent home from the office. That was pre then. So, I don't know the answers. I'm just saying for anyone listening, this is a story to probably understand well. No, exactly.

It's probably going to be fine too. Yeah, that's something. And I wrote it down as a note. So I still need to do some research on that. And it's more and more intriguing as a value play, I'll be honest. So cheap now. If I like it, maybe it'll pop up in my next update of the dividend portfolio. Jeez, because this was always a high quality growthy REIT that had a really low yield. Yeah, wasn't it like 2% to 3% in that range? It was 2% to 3% tops. Yeah. And it didn't grow much. So, it didn't really serve any purpose in

a dividend portfolio because it didn't really grow fast and it was a low yielder for REIT. So this kind of switches it on its head. All right. I will go here with my stocks on my watch list segment here, which is two quick names, but they're very different. And I'm actually putting my capital on the names that come up in this segment. Just staying true to the segment for the people of the pod, my most recent purchase was the most recent appearance of this segment, Intuitive Surgical. So I do own shares now. I feel quite good about it. It's still very expensive,

but it's come down a lot. All right. For me, two new ones here. And by new ones, I mean, it hasn't come up on the segment in a while. And I love the idea of buying Brookfield Asset Management here. It's like real, real creative here, Braden. But the asset management spinoff is going to unlock a bunch of short-term and long-term value, in my opinion. It's a company I sleep very well at night knowing I own it. And believe it or not, the reason it's in here is because I haven't bought shares in ages.

Despite how much we talk about it, it's only about a 5.5% position for me, which shocked me. Like for some reason, I thought I'd like double the position sizing in it. But I mean, that's why it's important to use a portfolio tracker like what we use in the template we give out on jointtci.com. the template we give out on jointtci.com because I'm like, I could sleep really well at night given my conviction in Brookfield Asset Management and the mothership of the business to double this position. I can't. I had a small amount because dirt and ramen, but I like the idea of that position here today. On the other side of the spectrum, I was doing some digging in some really beat up, what I'll say high high quality software as a service, SaaS companies that have really nice business models through tougher economic times and through the concept

of net dollar retention. And Datadog achieves nearly 140% net dollar retention, meaning that the existing customer base spends more and more on the platform each year. Net of churn upgrades actually far, far surpass that so that if they didn't sign any new enterprise deals, the business is still going to grow handsomely. And so this is an important metric for software businesses and Datadog is at the top of its class here. Now, what does Datadog do? Okay. I even tweeted just before the show. I was like, yo guys, WTF does data dog do? Explain like I'm five. I'm asking for a friend here, please. And we got some really good analogies, but essentially it simplifies to say you have like a ton of data points. It'll create

like a dashboard for you to like make actionable insights on monitoring across so many different endpoints. And still like, what does that mean? I don't know yet. And I have no technical clue of how this business works, why people use it over their competitors. Not a single clue. I've been explained this like over 10 times in person from friends. So clearly I'm watching this and that's just strictly on my watch list. I'm not even close to being 1% enough knowledgeable to be able to buy the stock here

today. One of the responses here, it collects, contextualizes, and organizes company data to turn it into actionable insights. I'm like, bro, I need dumber. I need it dumber. I truly need, explain like I'm five here. In all seriousness, the stock is down 50% and still trades at nosebleed multiples that I couldn't possibly justify given that I don't know enough about the business. But take a look. The growth, their financials, the net dollar retention, customer ads, there's clearly something here. And how much their customers talk about it, it's insane. For now, it's a bunch of buzzwords my peanut brand can't quite figure out, but there's clearly something here. And I don't know what it is yet. And that's why it's strictly just on this segment of the show today. Maybe in the

future, I'll have a lot more context on it. Yeah, yeah. I didn't really know. I heard of the name, didn't really know what they do. I mean, I kind of have an idea just based on that. I mean, my workplace, I know that's a big issue where they'll have data, but they just, you know, they don't really know what to do with it. And I think that's a big problem with a lot of organization. It sounds like they essentially take that data and they're able to make sense of it and provide action, you know, insights and things that the companies can actually do to utilize the data they have. So how they do this, that I would not be able to tell you. And I think there's some network effects in the machine learning though,

which might be interesting. No, I mean, I'm assuming they're not the only ones doing this. Like, I feel like I've heard this before, but yeah, there is,

there's other, I'm sure there's many competitors for sure. But I mean, and I'm not in a position to know why they would like, why are the metrics so exceptional? That's why it's ended up on my watch list. It's like the KPIs for the business and the financials and the income statement are like, holy, like something's clearly here. They must be doing something right. Yeah. With those. Yeah, exactly. Exactly. And so I just want to pull a couple, I just checked Twitter. I got

some funny responses here. So a lot of people were messing with me, but there's a lot of really good ones here as well. And someone said, it's like a robotic consultant. Instead of a person guessing on how you should strategically position your business, this robot will tell you with complete, like with conciseness. Someone trolled me and said, Datadog is a pet company. Okay. trolled me and said Datadog is a pet company. So that's funny. Oh, someone said here, it collects information on canines. Hilarious stuff here. Good old Twitter. Other good ones here. It helps developers create dashboards. I think that that's also helpful.

Gives you 10,000 foot view of the growing number of software applications built into your thing. And someone replied, you clearly don't know any five-year-olds to that response. Because they're like, dude, he said to explain like he's five. Good stuff. Oh, I love the internet. People are funny. That does it, Simone. That's a good episode. We just talked about so many. Good luck with the show notes. That's a job I don't envy. No, I know. I mean, I think it'll be fairly quick. It's just I know most of the tickers by heart here. So, it shouldn't be too hard to do and then create a little description that will get people excited. And don't forget, Texas Instruments is TXN. I remember now.

There you go. You're learning. Thanks for listening to the Canadian Investor Podcast. If you like today's show, share with a friend or subscribe on your podcast player because there's more like this twice a week. This is our Monday release. On Thursday releases, we talk news, what's going on in the fun world of financial markets, but in the context of long-term investing, real company fundamentals. Of course, we talk about the performance of these businesses over time and if it can affect the valuation,

if we think it's interesting, but we are talking about real business fundamentals, helping you separate the noise from the signal. This model portfolio you can find in a spreadsheet on join tci.com. Simone's going to courageously took the role of updating this every quarter. So we appreciate you. I appreciate you very much. We will see you 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.