Tuesday, January 10, 2012

Year 2011 and Last Quarter

How did the TSX do last year? Over the past 5 years, the TSX has declined 7.4%. This is the 4th such occurrence of a 5 year decline in the TSX since 1956. For 2011, the TSX declined 11%. The 5 year compound return on the TSX is a negative 1.52% per year.

For the TSX it is hard to get any long term data on dividends. However, the TSX site does provide some current information. See TSX Money site and go Indices & Constituents. If you click on the S&P/TSX Composite Index you will get some current information. One piece is current dividend yield which is running around 2.8%. If that was also the dividend yield for last year, it would imply a loss of 8.2% for the TSX last year.

Today, Thursday, January 12th, one commentator said including dividends, the TSX is down 8.7% in 2011.)

I have read a number of studies on this subject and none seem to agree with each other. I had read a study in the past the said that dividends add 2% return to the TSX over the long term and considering the dividend yield is current 2.8%, this sounds reasonable. Do not forget that dividend yield and the stock market go in the opposite direction. So, as the stock market goes up, the dividend yield will go down and visa versa. Also, Boom and Echo twitted a link on this subject for S&P 500. See Dividends.

So, how did I do? Over the past 5 years my portfolio’s return is 4.72% per year. The part of my return attributable to income is 67% per year. Since I am taking money out each year, my portfolio has increased at the rate of 1.84% per year. The difference between the 1.84% per year and the 4.72% a year is the money I have taken out each year, which is around 3% per year.

Last year my portfolio’s total return was 4.92%. I took out 3%. The part of my total returns attributable to dividends last year was 70%. (This compares to 25% in 2010 and 14% in 2009.) This would mean my stocks were up 1.92 %.)

Today, I am updating my spreadsheet on dividends. I have marked in blue those stocks I hold that have increased their dividends in the last quarter of 2011. These stocks are:

AltaGas Ltd (TSX-ALA);
Alimentation Couche Tard (TSX-ATD.B)
Emera Inc. (TSX-EMA)

Toronto Dominion Bank (TSX-TD)
Toromont Industries Ltd. (TSX-TIH)

AltaGas Ltd changed from an income trust in 2010 and reduced their dividends by some 38%. In 2011 they made their first increase after this change. The dividend was increased by 4.5% in the 4th quarter of 2011. Prior to the change from an income trust this company had a habit of yearly dividend increases. Current dividend yield is good at 4.34%.

For my last blog entries on this stock in April 2011, click here or here.

Alimentation Couche Tard has a habit of yearly increasing their dividends. The 5 year growth in dividends is 12.5% per year. In the 4th quarter they increased their dividends by 20%. This is the second increase for 2011. However, the dividend yield is low on this stock at 1%.

For my last blog entries on this stock in August 2011, click here or here.

Emera Inc. also increases their dividend yearly, and increases over the past 5 years were at 5.5% per year. The 5 year median dividend yield was 4.4%. Their dividend increase for 2011 occurred in the last quarter of 2011 and was for 3.8%.

For my last blog entries on this stock in June 2011, click here or here.

McCoy Corp is a rather risky small cap stock that pays dividends. I used it to soak up the small amount of cash I had left in the TFSA after my main purchase. Dividends are a little inconsistent as they stopped them entirely in 2010. It was a prudent move on their part not to pay dividends they could not afford. However, with the dividend increases in the last quarter of 2011, dividends are the highest they have ever been. Dividends are currently at a great yield of 5.1%.

For my last blog entry on this stock in May 2011, click here.

Toromont Industries Ltd. had a dividend increase of 10%. If you look at some charts, the stock seemed to fall off a cliff in June and decreased their dividends. However what happened was that they spun off Enerflex. Their dividends were not decreased if you held on to Enerflex. (Personally I was not interested in holding as a stock and have sold off the shares I received.)

For my last blog entries on this stock in March 2011, click here or here.

Toronto Dominion Bank ended their last financial year of October 2011 with another dividend increase. This is the second increase for this bank in that financial year. This last increase was for 3%. The total increase in dividends for this last financial year was 11.5%. The current yield for TD is 3.56%. Before this latest crisis, TD had a good track record of dividend increases.

For my last blog entries on this stock in December 2011, click here or here.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.


  1. If I understand, you make your living by cashing dividend and you also sell a part of your portfolio every year.

    That's very interesting.

    It's mean - or maybe I am wrong - that it's impossible (or maybe not), to make a living exclusively from a dividend income.

    No matter if it's possible or not, the fact that you sell part of your portfolio every year is interesting regarding the dividend income.

    I secretly always wanted to know - but I will never ask you that of course - how you earn in dividend income you make because you have many blue chips that pay little (from my point of view) in dividend.

    So now I understand how you make it happen.

    In my golden year I will think of you and do exactly what you are doing now, cash in dividend and cash out a little part of the portfolio each year.

    As always, you rock the place. No one can do betterrrrr. I hope you know that.

  2. I agree with Sunny, you rock!

    I have learnt more from reading your blog the past year than anything else I've looked at in the past 10 years! (and that includes newsletters that I have paid to subscribe to)

  3. Sunny:

    I actually do live of my dividends. My current dividend yield is running around 3.5% and I am taking out 3%. However, when I started to live off my investments, I was taking out closer to 4%.

    There are studies and theories about what you should be taking out of an investment portfolio. Generally it is accepted that the limit is 4% of the portfolio each year, if you are a minimum average of 8% per year.

    In theory, you could take out enough so your fund is depleted by age 90 or 100 or some specific age and this would allow you to take out much more. However, because of the volatility of the stock market, if you took out more than 4%, you might find yourself out funds before you plan to be out of funds. (A secular bear market could really hammer your portfolio.)

    My withdrawals are complicated by the fact that half my money is in RRSP accounts. So, I make withdrawals from these accounts that usually exceed the dividend income in them. I take from my Trading Account an amount less than my dividend income.

    My dividend income averages around 3.5%, but I have stocks with yields from around 1% to 9%. There tends to be a reverse correlation generally between yield and capital gain. Generally speaking the higher the yield you get from a stock, the lower the capital gain and visa versa. This is not always true. I have had stocks with high dividends and high capital gains, but this does not happen much.

    Pattirose and Watch Dog:

    Thank you for your kind comments.