A big pet peeve of mine is having to pay a fixed recurring bill. The power bill, gasoline, mortgage, cable, internet, phone, bank fees, and insurance premiums to name a few. These are great for the company being paid as it provides a consistent source of revenue for their balance sheets, but takes a dent out of my cash flow.
Although these bills can be painful, there is a bright side. Hedging! How do I hedge against these painful bills? By becoming part owner of the company and collecting the tax efficient dividends. You see, most of our (Canadian) bills are from big strong dividend payers that are on the market right now ready to be bought.
Are your bank fees or gas prices going up? Oil above $100? Cable bill getting ridiculous? This can be good news, it means higher profits for the companies that you can potentially own. Higher profits mean higher returns and dividends for you.
Here are some examples taken from the Dividends Achievers List:
|Bank of Montreal (bank)||BMO||5.54%|
|National Bank of Canada (bank)||NA||4.87%|
|IGM Financial (mutual fund co)||IGM||4.19%|
|TransCanada Corporation (utility)||TRP||3.55%|
|Great West Lifeco (insurance)||GWO||3.71%|
|Bank of Nova Scotia (bank)||BNS||3.73%|
|AGF Management (mutual fund co)||AGF.B||4.20%|
|Power Financial Corp (insurance/mutual funds)||PWF||3.36%|
|Royal Bank of Canada (bank)||RY||4.08%|
|Toronto-Dominion Bank (bank)||TD||3.23%|
|Sun Life Financial (insurance)||SLF||2.64%|
|Manulife Financial (insurance)||MFC||2.26%|
|Toromont (industrial equipment)||TIH||1.74%|
|RIOCAN Trust (commercial real estate)||REI.UN||6.35%|
|Husky Energy (oil)||HSE||3.17%|
|Canadian Western Bank (bank)||CWB||1.60%|
|Imperial Oil (oil)||IMO||0.60%|
|Brookfield Properties (real estate)||BAM.LV.A||1.65%|
|Canadian Natural Resources (oil sands)||CNQ||0.39%|
|Canadian National Railway (railway)||CNR||1.60%|
Some telecoms that didn’t make the list are Rogers Communications (RCI) and Manitoba Telecom (MBT). Both of which pay dividends. Another notable oil sands play is Canadian Oil Sands (COS.UN) which has a huge current dividend of 8.07%.
You can also consider buying US based dividend stocks, but they aren’t as attractive as their distributions are taxable at your marginal rate. However, there are some big names if you want to hedge against the cost of cruises, diapers, post it notes or appliances.
Although it may be well and good to collect dividends from these companies, they aren’t bullet proof. As with any stock, they will see volatility, some more than others. For most of the general public, it may be best to stick with an ETF like CDZ that will index a lot of these stocks.
Disclosure: I own some of the stocks mentioned above. Choosing individual stocks can be risky. Do your own due diligence before buying.
Photo credit: wrestlingentropy