Tips on dividend investing with Canadian perspective


Although we've been involved in dividend growth investing for a number of years, we are still learning. Mrs. T and I are always looking for ways to gain more knowledge on investment and personal finance topics. There are many ways to learn. Books and blogs are a great way to gain investment and PF knowledge. Finding like-minded people to have deep discussions is another great way to gain and share knowledge. Over the last few months some readers have asked us some questions on dividend growth investing. Here's our version of a quick overview & tips on dividend investing with a Canadian perspective.


1. Good Dividend Books
Here are some books that are great to get you started on the dividend investing journey.

The Lazy Investor by Derek Foster
The Intelligent Investor by Benjamin Graham
The Single Best Investment: Creating Wealth with Dividend Growth by Lowell Miller


2. Dividend stock allocation
Maximize your tax sheltered accounts like RRSP and TFSA first. With the recent announcement of TFSA contribution limit increasing from $5,500 to $10,000, we believe TFSA is now THE tax-sheltered account to utilize for dividend stock investment.

Hold Real Estate Income Trusts (REITs) and income trusts in TFSA. This is especially important if you're enrolled in dividend reinvestment plans (DRIP) since calculating your cost basis with dividends from REITs and income trusts can be quite complicated. Although I'm a math nerd at heart, I like to keep my life as simple as possible when it comes to tax time.

Hold US dividend stocks in RRSP to avoid the 15% withholding tax. It is a good idea to use a broker that offers both Canadian and US RRSP, meaning your RRSP account will hold cash in both Canadian and US currencies. This way you will receive US dividend in US currency rather than having it converted back to Canadian currency. Having an RRSP account that allows you to hold dual currency will allow you to avoid having to constantly deal with currency conversion.

Hold Canadian dividend stocks from Canadian public corporations that pay eligible dividends in a regular (non-registered) account for the enhanced dividend tax credit. Eligible dividends get much more favourable treatment compared to active income. So when we get taxed on dividends, the actual tax amount will be relatively small.


3. Invest in Canadian brands that you know or use
This seems to be a common concept when it comes to investing in general but we think the concept is even more important when it comes to dividend investing. Invest in a brand that you know or use. For example we see Royal Bank and TD Bank branches everywhere and have experience banking with both of them. Their stocks both pay dividends, so it's probably a good idea to spend some time to investigate whether it's worthwhile to own these stocks or not.


4. Enroll in dividend re-investment plan whenever possible
Become a good friend with Compound Interest. It's one of the most powerful friend you can have in this world. When it comes to dividend investing, enroll in dividend reinvestment plan (DRIP) will allow you take advantage of the power of compound interest. There are two types of DRIPs - full/regular DRIP and synthetic DRIP. We are enrolled in regular DRIP for Baby T's portfolio and synthetic DRIP for our dividend portfolio.


5. Use Online Tools for research
Here are some excellent websites that we use to for stock research purposes - excellent website for DRIP investors. You can get an extended list of US and Canadian dividend champions/all stars. - excellent website for doing research on dividend growth history. I also like using its Dividend Reinvestment Calculator to reenforce the idea that DRIP is very powerful in the long run. - a great website for getting stock evaluation information. - I use Yahoo Finance to find information like PEG ratio, return on equity (ROE), and other key company stats.
Graham Number Calculator - This is a neat calculator for finding the Graham Number for US stocks.
Value Ratio TSX60 - A good tool to see which Canadian stocks offer great value.


6. Have fun and Enjoy the journey
Don't take dividend investment too seriously. Have some fun and enjoy the journey. Have some beer and watch a hockey game.  Enjoy the Canadian outdoor, whether it's snowing or sunny outside. We live in one of the best countries in the world.


Do you have any tips or online tools that you'd like to share?

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  • Reply
    April 27, 2015 at 6:17 am

    Excellent summary! Question: "Hold US dividend stocks in RRSP to avoid the 15% withholding tax..: I have read in a few blogs that you can claim back the 15% withholding tax in non-registered accounts. Can you describe how that would be done? I happen to have some US div. paying stocks stuck in my non-reg. account. How they got there? My inept former investment advisor bought them. Now, the capital has appreciated so much that if I sell them, I would have significant capital gains tax to pay.

    • Reply
      April 27, 2015 at 7:43 pm

      Hi Helen,

      You can definitely claim the 15% withholding tax if you hold US dividend stocks in non-registered accounts. You can claim foreign tax in your tax return. Having said that if we can maximize in RRSP why not take advantage of that?

  • Reply
    April 27, 2015 at 7:15 am

    Grest advice.
    The book that got me on the raod to dividend investing was Motley Fools"s INVESTMENT GUIDE. Although some of it has been disproved it was a good start to get the mutual fund cobweb out of my brain.
    Personnally I prefer CDN companies over US comapnies at least at present because of the exchange rate. I don't feel like betting where the exchange rate is going, up or down, as well as trying to pick the "right" company. The recent appreciation of the CDN $ is a good example. Buying 100 stocks at $100 US each (JNJ as an example) could be up to $600 CDN (exch rate @ .28 or @ .22) in COP. That is a lot of dividends to make up.
    Besides, one can diversify your stock allocation quite well with Canadian dividend paying stocks.
    Picking the right stock, don't we all wish we could do this, is the big thing to keep in mind. Dividend payout on COP is a stat to keep in mind but if you can sell out a stock and double your dividends then that is something to consider. I got lucky with JNJ selling them with a 45% cap appreciation (all in my RRSP) and bought KMI before it consolidated. So I got a company that has increased in value AND pays me more than twoce the dividends that JNJ was previously. So the buy and hold strategy can be good but don't be blinded by it at the same time.

    Keep up the good work TC

    • Reply
      April 27, 2015 at 7:46 pm

      Hi Richardo,

      I'll have to take a look at Investment Guide. Haven't heard it before and it sounds interesting. I think CDN companies are great but when it comes to having more international exposure and truly global companies, US exchanges do offer more choices. You have a good point about don't be blinded with buy and hold... that's why we need to evaluate the portfolio holding from time to time. Thanks for taking the time to comment.

  • Reply
    Mr. FSF
    April 27, 2015 at 9:40 am

    Nice overview, it's got some great and useful links as well.

    • Reply
      April 27, 2015 at 7:47 pm

      Hi Mr. FSF,

      Hope the links will be useful to you. 🙂

  • Reply
    April 27, 2015 at 10:03 am


    Impressive detailed summary and it show that it's complex to make passive income.
    It comforts me in a way to continue investing only in Swiss Market to avoid all these hassles.



    • Reply
      April 27, 2015 at 7:48 pm

      Hi RA50,

      It's always good to venture out of your own country and add some international exposures though. There are a lot of good European dividend paying companies out there. Definitely take a look.

  • Reply
    Jayson @ Monster Piggy Bank
    April 28, 2015 at 3:39 am

    Tawcan, I have already read the book The Intelligent Investor by Benjamin Graham. The book is really a great investment. And, what I mostly love about this book is that it teaches us to develop long-term strategies in investment. Highly recommendable book indeed!

    • Reply
      May 3, 2015 at 4:53 pm

      Hi Jayson,

      That book is a classic, every investor should read it. 🙂

  • Reply
    The Professor
    April 29, 2015 at 1:32 pm

    Ever read any of Peter Lynch's stuff? He's really good. I also like Robert Schiller and Jeremy Siegel.

    • Reply
      May 3, 2015 at 4:52 pm

      Hi The Professor,

      I have read Lynch, Schiller, and Siegel's books. Great stuff for sure.

  • Reply
    Dividend Wisp
    April 30, 2015 at 11:03 pm

    Simply cannot go wrong with Diversification, Tax Efficiency and Compounding! The more you know the sooner you will be able to live free! For me, I just need to get the DRIPs set up and I'll be rolling!

    Thanks for the research tool links.

    • Reply
      May 3, 2015 at 4:56 pm

      Hi Dividend Wisp,

      DRIP is a great idea and makes life a lot easier. Definitely set it up if you can. Cheers!

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