Given the history and long term success of what is commonly referred to as a “Dogs of the Dow” investment strategy, it is not surprising for us to see Durig’s modified Dogs of the Dow and Dogs of the S&P 500 strategies tracking a similar path towards long term success. In fact, it led us to initiate a similar strategy (in May of last year) utilizing Canadian companies that likewise had a long history of paying increasing dividends.
What has surprised us, however, is just how fast and how far this team of Dividend Dogs of Canada has pulled into the lead. The performance has been so strong over the last six month, we must say a few words here to remind you that past performance is no guarantee of future results. Furthermore, do keep in mind that over this same time period that these Canadian Dogs have risen nearly 50%, the S&P 500 has risen nearly 30%. Those are both remarkable returns. But, clearly the Canadian team has charged ahead of this far older, much more experienced benchmark.
Although this paints a great return picture for 2020, over time we suspect that the Canadian Dividend Dogs will be more in line with our other Dogs portfolios. Also, please note that historically dividend aristocrat companies (i.e., companies that over time increase dividends) outperform over time. With the extremely high dividend average still looking to be about 6.5%, this kind of cash flow has been a welcome addition to the rough and tumble world of investing in 2020.
These Canadian-based companies provide very unique diversification especially for a concentrated portfolio. All the companies are Canadian, and even though Canada shares the longest border with the US and is mostly English, it has its own government, currency, banking, economy, and prime minister. Its economy is more weighted to the natural resources industries. This enables very significant diversification, away from the high dividend companies in the US, while still being somewhat correlated to the US.
Canadian Dividend Dogs is a concentrated portfolio of high dividend aristocrats based in Canada. Their risk return, government and currency is unique to their own country and overtime it appears that they have been somewhat correlated to the US markets.
Furthermore, it should be noted that most dividends paid are subject to a 25% Canadian tax withholding. Although a tax treaty with Canada ensures that these taxes that are paid to Canada qualify for an equivalent dollar for dollar offset against any US taxes that normally might be due, this withholding results in a reduction of cash flow and would effectually lower overall returns within a tax advantaged account (such as an IRA) until such a time when the taxes paid to Canada can be credited against any US taxes dues on any withdrawals from the account.
Dividend Dogs of Canada
Annual Cost: 0.50% or 1/8 of a percent per quarter.Average Dividend Yield of About: 6.48%
Minimum Investment: $15,000
No Cost Transactions
Minimum Holding Period: None
Dividend Income Growth
First started at an amazing 7% rate, which has only declined slightly due to an increase in equity prices and possibly some rebalancing within the portfolio. Bear in mind also that the Canadian Dividend Dogs are Canadian companies that have a history of either holding steady or raising their dividend every year. In addition to providing dynamic weighting to the accounts, Durig rebalances the portfolios quarterly to accommodate changes in the dividend percentages relative to stock prices. All trades are completed transaction free, even the Canadian companies. Given these factors, there is a high probability the divided income could go up every year.
These 6.5% dividend rates in Canada are some of the best rates we could find in our current display of programs. With America, Europe and Japan offering with very low to negative interest rates, it makes it very hard to find good income, and much harder yet to find income with very good principal performance. Naturally, we don’t expect such a high rate of returns to be sustainable over a very long period of time, and suspect that it is more likely to return to something more in line with other dividend dogs strategies. Still the noticeably higher 6.5% dividend cash flow of this portfolio is higher than the Dogs of the Dow or Dogs of the S&P, and that in itself may make it very attractive for certain income investors.
We offer our successful Durig’s Canadian Dividend Dogs investment strategies to other Charles Schwab Registered Investment Advisors through segregated accounts. Our price is the very low cost of only 50 basis points, and RIA’s can adjust other fees as they believe is best situated for their clients or firm.
Disclaimer: Past performance is no indication of future success. The high yield strategies presented in this review by Durig may not be suitable for all investors. This is not investment advice from Durig, nor a specific recommendation to buy or sell securities. If you have any questions or concerns about its suitability for your personal investment, you should seek specific investment advice from a registered professional before making an investment decision. Information on this website is provided for informational purposes only and is not offered as advice with respect to any particular security or related financial instrument. This information should not be used as a basis for making an investment decision and must not be treated as a substitute for seeking advice from a licensed professional. The suitability of a given investment for a particular investor depends on a number of factors, each of which should be considered carefully. Such factors include, but are not limited to, the risk associated with the investment, the nature of current market conditions, and the investor’s objectives, personal needs, and specific circumstances.