Category Archives: Dividend Ideas

3 Simple Tips to Build a Safe Dividend Income

Do you want a dividend income stream that will increase every year? Here are some simple tips to check for the dividend stocks you’re interested in. The order to check matters because if the dividend stock doesn’t pass checkpoint one, it’s out. 

Don’t slip up. You can keep your dividend income safe by following these 3 simple tips!

Does the dividend stock have a track record of dividend payments?

Notably, this checkpoint allows dividend stocks that have a track record of maintaining or increasing their dividends to pass. Though we prefer stocks to increase their dividends every year, we understand that sometimes the macro environment forces stocks to freeze their dividends. It is a great feat to even maintain dividends during stressful times. 

For example, to be prudent, the regulators forced the big Canadian banks to freeze their dividends around the time of the last financial crisis in 2009 and 2010. Once again, the regulators forced the banks to freeze their dividends. Even the best of the bunch, National Bank of Canada (TSX:NA) has maintained the same quarterly dividend for seven consecutive quarters so far, whereas prior to the pandemic, it increased dividends every two quarters. 

Again, the dividend freeze is no fault of the big banks. National Bank has maintained or increased its dividend every year since at least 2002. Now, that’s a track record!

Depending on your comfortability, you might seek dividend stocks that have maintained or increased dividends for at least five, 10, 15, or 20 years. 

If a dividend stock hasn’t made consistent dividend payments for at least five consecutive years, it’s out. The five-year test would include the stressful pandemic period that we’re experiencing, which is a decent test of resilience/defensiveness for a dividend stock.

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When Should You Buy Dividend Stocks like Pepsi or Fortis?

Other than being dividend stocks, what do Pepsi (NASDAQ:PEP) and Fortis (TSX:FTS)(NYSE:FTS) have in common? 

The dividend stocks have resilient earnings. They are Dividend Aristocrats with a track record of dividend increases. Pepsi and Fortis pay dividends that are sustainable. They offer nice yields of about 3-4%

I use a method that suggests good stock price ranges to buy this type of dividend stocks at. Recently, I have used exactly this method to buy shares of Pepsi and Fortis. I’ll explain the method later in this article. First, let’s go through the above commonalities in more detail.

Blue sky with cloudy words saying change. Grass field in background.
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Stock Investing is Not Just About Returns: 2 Things You Might Care More About!

As you may know, I’ve been investing in stocks for about 13 years. I surely love it when my stocks provide outperforming returns. Of course, there are laggards, too. 

What more can stock investing be about if it’s not just about returns? Every stock investor wants to get rich, right?

I discuss below why earnings quality and dividend income could be important to you.

a pile of U.S. dollar bills
Photo: SuperTowTrucks Blog. Licence: CC 2.0. Source: flickr

Earnings Quality

Since I delved into growth investing, including in small caps, I’ve become more deeply appreciative of stocks with underlying businesses that have superb earnings quality.

I hate to break the news. Stocks with high earnings quality won’t give you the greatest returns. However, they give you something else — a defensive, low-risk holding. These kinds of stocks should provide reassurance to any stock investor when the macro environment is in turmoil. 

The more conservative you are as a stock investor, the bigger percentage of these types of stocks you should hold in your stock portfolio. 

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