Small Business

Why I Would Never Start a Bricks and Mortar Retail Business

Those of us growing up watching sitcoms like Friends have, at some time or another, had the thought of starting a cozy coffee shop. Running a local gathering spot, hanging out with customers who become friends, toying with decorating ideas and promos, picking the music playlist…it all sounds more like fun than work.

Central Perk Coffee Shops Are One Step Closer to Being a ...

Others have romanticized about boutique clothing stores, cannabis dispensaries, record stores and so on. The dream of opening a sweet little local spot sounds great, assuming everything falls into place. However, so many things have to go right in order for a bricks-and-mortar retail store to succeed.

The problem with physical retail is that you can have a great idea and a viable business but still fail.

==> A great business in a bad location will fail.

==> A great business opened off season or at the wrong time (e.g. when there’s road construction) will fail.

==> A great business not promoted properly will fail.

==> A great business with the wrong merchandise mix or pricing will fail.

==> A great business with weird hours will fail.

You get the point.

There are tons of ways a bricks-and-mortar retail business can fail, despite being a great concept. Of course, many of these problems are fixable over time. Unfortunately, the bills – rent, heat, hydro, staffing, etc. – don’t stop while you figure things out. Once the doors open, the countdown to bankruptcy begins.

Even if you luck out and successfully launch a bricks-and-mortar business, you’re still vulnerable to the changing physical environment. I’ve seen numerous local business collapse due to unexpected traffic changes, construction or criminal activity. The obvious wild card today is the lockdown due to Covid-19. The pandemic simply isn’t survivable for many retail business, many of which existed for years.

Sweep away all the negativity for a minute and let’s say you manage to build a profitable retail business that survives for years. Believe it or not, you’re still probably SOL over the long run. Once a retail business becomes successful, landlords see the opportunity and try to grab a share of the profits by raising rent once the lease is up for renewal. I’ve seen landlords triple rents on successful small business, squeezing every drop from the business. Given this, even the most successful bricks and mortar businesses are fleeting.

The few small retailers that actually last decades often own their physical location. Unless you’re a national chain, there simply isn’t any other way around it.

I love the flavour local retailers bring to a neighbourhood. I enjoy interacting with proprietors and supporting these businesses with my money. However, I warn anyone expressing interest in opening a retail business with a physical location. The chance of building something long term is so slim it just doesn’t seem worth the effort.

Edit (October 8th, 2020): As I was walking today I remembered another major reason I would never start a bricks-and-mortar business. You need to be there ALL THE TIME. Depending on the type of business, opening hours might be 10-12hrs daily. That’s 10-12 hours a day, sometimes 7 days a week you need to be present, regardless of how sick or tired you feel. Have a migraine? Tough. Want to take a vacation? Tough. Bricks-and-mortar retail needs boots on the ground, and if they’re not the owner’s boots it can get prohibitively expensive.


Dividend Investing’s Psychological Edge

In theory, the companies that provide the best return are the ones with projects that produce the best ROIC (return on invested capital). Let’s say a retailer (Company X) has discovered a new format of store that generates an ROIC well above what investors could get elsewhere. For this company it would make sense to retain all earnings to reinvest in more stores. It wouldn’t make sense to distribute cash back to investors.

Company X can generate better returns for investors by reinvesting in its own growth prospects. Therefore, Company X stock price should outperform other companies with less favourable growth prospects.

I get the theory and it makes sense. A stock with high growth prospects will tend to have a higher total return than a stock with lower growth prospects. (Of course, not all growth prospects become real so many growth companies eventually fall behind expectations. In fact, there is some research that suggests dividend growers outperform non-dividend stocks over the long run. But for this article, let’s use the simplistic assumption that growth stocks outperform dividend growth stocks.)

The assumption that growth stocks outperform dividend-paying stocks fails to consider investor behaviour and what actually happens at the account level. At the account level, a big segment of investors will perform better by investing in slower growing companies that pay regular and growing dividends.

Stock prices frequently experience corrections and bear markets. Investors have a tendency to ‘buy high, sell low’ – the opposite of what they’re supposed to do – because when stock prices are falling it often feels like the world is crumbling. The news is bad and investors have no idea how much the decline will be. So they see that their holdings are down 10, 20% and they sell. These emotional buy/sell decisions made at the wrong time have a huge negative impact to long-term returns. Indeed, investors tend to drastically underperform the S&P 500.

One of the critical components to becoming a decent investor is to control emotions. We need to fight millions of years of evolution telling us to run when things start to look bad.

My view is that dividend streams help to do that. An investor that holds a portfolio of dividend paying stocks will still receive a stream of cashflow into their account, regardless of stock price performance. I believe these payments are a form of positive reinforcement that rewards good investor behaviour – namely, doing nothing or investing more when stocks are down.

Taking this a step further, many dividend investors view their capital as the price of entry to receive a perpetual and growing dividend stream. You’re trading a lump sum for a stream of income. Investors who look at their portfolios this way will be even less inclined to sell when markets correct, for that would cut their stream of income.

In summary, dividend growth stocks might not produce higher total returns than growth stocks. However, dividend growth investing might because of the positive effects on investor behaviour.

Income Investing Investing

4 Dividend Growth Opportunities To Benefit From Market Decline

Some of you may know that I occasionally write articles for Seeking Alpha. To be honest I do this to draw attention to and to generate a little extra income.

I normally don’t promote these articles on DumbWealth, but this particular one seemed to get a lot of interest from dividend investors so I figured I’d let you know.


  • Stocks are on sale. Yet many allow emotions to get in the way of their investing success.
  • Research shows that the best long-term investing strategy is to invest when you have the money. Avoid market timing.
  • I neither have the time nor energy to track my investments constantly. I look for solid dividend growth companies I can buy and forget about.
  • I’ve identified four dividend growth companies that are currently trading 12-34% below their YTD highs and are worthy of further consideration.

Read my full article on Seeking Alpha


10 Things You Can Do To Succeed in a New Job

Over the years I’ve employed dozens of people, many of whom were just starting their careers. I’ve helped many people transition from entry-level staff to senior managers and directors within the investments industry.

I am always willing to invest my time in someone who first commits to investing in themselves. I say this because while many people talk about growing their careers, not everyone puts the energy into doing so. If you are just starting out and want to build a career, you must first look inward.

What can you do to help yourself? It’s quite simple:

  1. Absorb as much information as possible, whether it comes from industry research, department meetings, competitive intelligence, and so on. If you’re new, almost everyone around you knows more than you. Respect this fact and use it to your advantage to learn.
  2. Understand what your firm does, who it serves and what makes it different from its competitors. Determine industry threats and opportunities, and company weaknesses and strengths. Get a sense of the competitive landscape.
  3. Take the time to connect with the people you serve – internal or external clients. Ask them a lot of questions about their opinions on the business and listen. Some people see the vague offer for an open-ended ‘coffee chat’ as a waste of time. Instead, get to the point and say “I’d like to get your thoughts on topic X”. First, email them the question. If they’d rather talk on the phone or meet for coffee they’ll let you know.
  4. Observe the successful people in your industry and emulate them to a degree. Of course, you shouldn’t uncomfortably adopt a fake persona but if you see a common theme among successful people you might have no choice but to try new things.
  5. Ask for feedback and learn from that feeback. Your boss is paid to be your mentor. Take advantage of that, but also reach out to colleagues for feedback. A lot of work is subjective so you want to get multiple opinions on your work. As you get feedback, remember it and incorporate it into future efforts.
  6. Make lists. Every time you get a new task add it to a list in a notebook. At the end of each day cross completed items off your list and copy incomplete items onto a new list on the next page of your notebook. Lists are a critical tool to help ensure you get things done. It’s simple, but it works. Lists were key to my success.
  7. Do what you say you’re going to do. So many people in big companies get complacent and after saying they’ll do something never follow through. While they might not get in trouble, they do lose credibility.
  8. Arrive early and work late. I’m sorry, this one sucks. But if you want to build your career you need to invest in your work. One of the simplest ways to set yourself from others is to work harder than others. Of course, don’t allow yourself to burn out or become unproductive. If it’s 7pm and you’re just spinning your wheels it might be time to call it a day. Personally, what takes me an hour at 6pm might take me 10 minutes the next morning.
  9. Remember: We’re all just winging it. The only thing setting you apart from more experienced people is knowledge and experience. They aren’t better or more skillful. So don’t feel inferior. After all, more experienced people are still making it up as they go – they just have more information to depend on.
  10. Promote your work. After you’ve completed a task send an email to the team or present it in your department meeting. Teach people how to use your work. Show people what you’ve done and what you’re capable of.

I think by doing these 10 things consistently, a junior level employee can start to set themselves apart from the pack.

Life Work

Cash for Life

I have to be pretty bummed out to play the lottery.

I know the odds of winning are infinitesimal and the lottery is essentially a self-imposed tax. Yet, sometimes I just need the fantasy of quick riches to infuse some hope into a crappy week.

With that said, I’ve only bought a couple tickets over the last several years. I guess I’m generally happy.

But what if I did win? I joke that I’d quit my job if I won 10 grand. Of course, that’s not realistic. To be honest, I’ve thought a lot about this and I’m still not sure how much I’d need to feel like it’s time to quit my job.

I am working towards financial independence, but it’s a moving target. I do set goals, but every time I approach my goal I stretch it. Over the short run I’m fortifying my finances. Over the long run I’m trading my finite time for money.

Most of us are only on this planet for about 80 years, so there comes a point at which you must choose to live life your way. That’s easy to write but hard to do.

Although I moan about it sometimes, I have a great job and I have worked hard for the equity in my career. I have to admit, I’m scared to walk away from a career that many would gun for. Partly, my fear is that I’d quit and discover that I didn’t have enough money. My other fear is that people would think I’m stupid for walking away from a great job. I shouldn’t care, but that’s human nature I suppose.

However, eventually one must prioritize what they truly want out of life. The fact that you are alive to read this is a fluke of magnificent proportions. Life is a gift that can’t be wasted on committee meetings and the general circle-jerk of corporate nonsense.

“Walking away” isn’t about abandoning work completely. Instead, we need to seek fulfillment, whether that comes from painting pictures, teaching children or renovating kitchens. This could also mean de-prioritizing money.

Fulfillment comes from making a meaningful impact, seeing the fruits of your labor and helping people. Fulfillment doesn’t come from leasing a new BMW every five years.

Building wealth and financial freedom isn’t just about chasing money. It’s about having what you need to live an interesting and productive life – a life that will be remembered.

I still don’t know when enough is enough. However, when walking away from something it’s important to have something to walk towards. Without first discovering what you find fulfilling you’ll never be able to walk away – no matter how much money you have.

Income Investing Investing

BCE: 128% Dividend Growth Since 2008


In my opinion, BCE benefits from the insulating properties of Canada’s telecom oligopoly, and therefore should benefit from long term pricing power and customer retention. The stock trades at a reasonable valuation and has a good dividend track record. As a dividend growth investor, BCE is part of my portfolio.

Please consult a registered professional before making any investment decisions for your own portfolio.

Companies in Oligopolies Are Insulated From Competitive Forces

Canada has a relatively small population that is spread across a vast geography. This has profound implications for the structure of the Canadian economy and the companies that dominate. 

Source: Wikipedia

Simply, Canada doesn’t have the population size or density for many industries to support multiple companies operating at efficient scale. For this reason, many industries in Canada operate as oligopolies, with a handful of dominant players with little to no threat from new entrants. This is especially true in industries with high entry costs like telecommunications, media and financial services.

Since it is difficult to create scale in these industries, there is the constant threat to the Canadian economy that the number of players in these oligopolies shrinks. Many would agree when I say executives in these industries are usually closely tied with government, receiving implicit support for profitability. (If the Canadian government wasn’t trying to insulate these industries they’d make it easier for foreign competition to enter the marketplace!)

These industries provide core infrastructure to the Canadian economy, so to balance access with profitability the Canadian government must turn a blind eye to obscene pricing.

This sucks for Canadian consumers, but it’s great for investors.

Telecom Giants

Let’s look at Canada’s mobile phone industry as an example. The following chart compares mobile phone plans in Canada with those in the United States. As you can see, Canadians pay a 15-40% premium for the same service.


Despite higher prices, there remains little choice and consumers aren’t deterred from buying. Consequently, the big 3 carriers (BCE, Rogers and Telus) in Canada – which have a 90% market share – continue to grow mobile revenues.

Infographic 10.2 Highlights of the retail mobile revenues, 2018
Source: CRTC

Of course, these big 3 telecom companies provide more than just mobile phone services. They are telecom and media conglomerates that control Canadian wireless, wireline, internet, media and professional sports franchises. Essentially, these companies control a huge portion of everything seen and heard in Canada. Not all business segments are shooting the lights out, but they retain tight control and strong pricing power. Moreover, the bundling effect of packaging several related products and services provides a strong customer retention incentive and helps drive out pure-play competition.


BCE is Canada’s largest telecommunications company with a customer base of over 22 million subscribers. This is approximately 60% of the entire Canadian population. With its wireless infrastructure reaching 99% of the Canadian population and wireline infrastructure reaching about 75% of the population, BCE is well positioned for continued subscriber growth.

Canadians love to complain about BCE (aka Bell) and its main competitor Rogers. (I’d love to read your stories in the comments below.) However, given its infrastructure and network quality – and with few alternatives – Canadians continue to fork over money to the many brands that BCE controls. 

For those not familiar, BCE owns the following (which I copied from BCE’s website):

Business LineDescription
BellCanada’s broadband leader providing advanced wireless, Internet, TV, smart home and business services over our world-class LTE and fibre networks.
Bell AliantAtlantic Canada’s leading name in residential Internet, TV, and home phone services, and a trusted partner to business and public sector clients.
Bell MediaCanada’s leading content creation company with premier assets in television, radio, out-of-home advertising, and digital media.
Bell MTSManitoba’s top name in home and business communications, and a leader in managed data and professional services through our Epic subsidiary.
Lucky MobileLow-cost prepaid wireless featuring convenient account management app and flexible add-ons for data, international calling and more.
Northwes TelLeading investor in communications infrastructure in Canada’s north, providing Internet, TV and phone services over a vast territory.
The SourceCanada’s largest tech retailer, offering the latest products from top brands and knowledgeable associates at stores across the country.
Virgin MobileNational provider of pre- and post-paid wireless services with award-winning customer service and innovative Member Benefits.
Source: BCE Website

The Bell brand is currently the top non-financial brand in Canada, as rated by Brand Finance’s list of the Top 100 Canadian brands for 2018. So it appears that a vocal minority of complainers is out-weighed by a silent majority of BCE customers (or at least by the committee that ranks these brands).

While BCE’s oligopolistic power helps retain customers, it actually does provide a valuable, high quality service. So it’s not hard to understand why many people are fine with BCE’s products and services.

As a lead company within the Canadian telecom oligopoly, I expect BCE to retain this market power, as it continues to own, control and invest in critical infrastructure, including 5G. This gives BCE a market position that is unlikely to erode anytime soon, in my opinion.

BCE Dividend

BCE stock currently has a dividend yield just under 6% and has a solid track record of dividend growth. Since 2008, its dividend has grown by 128%, with each increase at 5% or more. BCE dividend policy aims to grow dividends while maintaining a payout ratio (based on free cash flow) of 65-75%, and has done so over most of the past 12 years.

Throughout the 2020 Covid-19 crisis, BCE’s dividend has remained well-covered by free cash flows, with YTD coverage at about 66%. Moreover, according to BCE:

“Our strong liquidity position, underpinned by a healthy balance sheet, substantial free cash flow generation and access to the debt and bank capital markets, is expected to provide significant financial flexibility to execute on our planned capital expenditures for 2020 and to sustain BCE’s common share dividend payments for the foreseeable future.”

BCE Q2 2020 Shareholder Report

As a ‘boring’ telecom provider, BCE has weathered the Covid-19 economic crisis remarkably well, as highlighted during its Q2 2020 presentation. Operating revenues declined by 9.1% year-over-year, but the business saw growth in other metrics. This adds to my confidence that BCE will be able to continue to pay its dividend throughout the ongoing crisis and beyond.

Source: BCE


The biggest immediate risks to BCE is the unpredictability of the pandemic and capital markets. However, as Q2 performance suggests BCE is hurting less than other companies. 

Over the long run, I think the biggest structural risks to BCE are the following:

1. Changing viewer habits: Specifically, people ‘cutting the cord’ and moving away from traditional TV distribution. This is especially prevalent with younger generations.

2. Rising content costs: With the growing need for proprietary content – Netflix, Disney+, Crave, etc. – there is increased competition, driving prices upwards. 

3. Market saturation: With such deep penetration, there are limits to new subscriber growth. However, the ability to continuously increase prices helps offset this risk. Continued population growth (once immigration picks up again post-Covid) will also help offset this risk.

Final Thoughts

Currently, BCE is neither cheap nor expensive. It trades at 17x forward earnings – reasonable and far below many other alternatives in this effervescent market.

Source: Yahoo Finance

In my opinion, BCE is fairly insulated from game-changing competition. As part of an oligopoly, BCE should retain pricing power and a strong hold of its customer base for a long time.

Over the long run I believe BCE revenue should be able to keep up with nominal GDP growth (at least) and will likely continue to grow dividends in parallel. While I’m not expecting massive BCE stock price appreciation, I would be happy with a slow grind upwards supported by a growing dividend stream.

For these reasons, BCE is one of my ‘buy-hold-and-forget’ holdings.


Career Day: Amazon has 33k Available Jobs

Amazon Career Day is a virtual event that will offer 33,000 corporate and tech jobs across the country plus 20,000 free, individual career coaching sessions available to all job seekers. Amazon is mobilizing 1,000 recruiters to provide advice and personalized coaching to navigate the current jobs market – to apply for a job at Amazon or elsewhere. Anyone can participate in Career Day and register to book an appointment with an Amazon recruiter.


People Who Love Their Jobs: What Do They Do?

I sort of assume that everyone hates their job, and those that seem like they enjoy it are either faking it or psychopaths. Of course, I’m wrong. There are people out there who genuinely love their jobs. Some days I genuinely love my job. When you strip away the corporate bullshit there is a lot to like.

Below is a collection of comments from people describing why they love their jobs. If you or anyone you know are looking for some career direction, this might be the place to start.

Let me know if you see the pattern.

People who like their job, what do you do?

I think up and draw cartoons. Every day. A syndicated comic for newspapers. Only learned to draw at age 43 so it’s been a cool midlife turn. I’m one of those handful of people trying to be at least a fraction of what Gary Larson was/is.

I am a speech therapist working with stroke patients. I love rehab. I tried pediatrics but it was not my thing. Rehab is for me.

Matte painter for film

It’s fun and lives at the intersection between having to have artistic talent and technical experience. Honestly sometimes it can be maddening as I come from a creative background (traditional illustration and sculpture) so certain programs are like going from speaking French to speaking Chinese.

But all in all it’s fun to see your work when it’s composited into a film and get to see the shots before any VFX goes in.

Frankly it’s surprising just how many movies use VFX and I can assure you it’s almost everything you’ve seen including smaller independent films.

Seaplane pilot – charters, sightseeing, fly-in-fishing, & seaplane flight training.

I make replicas of dinosaur fossils for museum display. The company I work for does full sized replicas, but I primarily work in the division that creates teeth and claw replicas, and a few scaled down skull replicas, for gift shops.

I’m a night shift worker at a manufacturing facility. I love being able to set all my machines, read a book (or play on my 3DS), and be by myself. Once all my machines are set, I just need to change finished parts for new blanks every 15-20 minutes.

Waste management. I drive a garbage truck. I start early but there are days I’m off at noon. A full 8 hours for me ends at 1:30 and I work 5 minutes from my house. I am in the AC all day and left alone. It’s wonderful.

I’m a locomotive engineer. It’s badass controlling thousands of horsepower and tons all with my hands. I love running with the window open listening to the power working and waving a people when they wave with more than one finger.

I work at a grocery store. I love my coworkers, we’re tight, my managers are really helpful and understanding, and I guess I just like working? I’ve done a lot of volunteering before this so now that I’m still doing things for others but getting paid (!) it’s pretty wild. Also, my coworkers are so fun. Did I mention them?

Facilities—a glorified janitor.

The position has morphed, I started by cleaning floors and toilets. Now so many of my creative strengths are used. We’re updating our campus, so we build furniture, construct new walls and stages, choose paint colors, engineer unique solutions for an aging campus, and so much more. I’ve learned electrical, concrete work, welding, sound engineering, drywall, installation of floors, ceilings, doors, stage backdrops, you name it. If something needs be be done, we get it done. I love it.

Before the pandemic shut everything down I was a Broadway dresser! I got to work backstage on some awesome shows with pretty costumes and be a part of the magic, it was such a rewarding feeling.

I’m a Meteorologist. I look at weather all around the world and work directly with Fortune 500 companies to help them prepare for natural disasters.

Considering I’ve wanted to be a Meteorologist since I was 5, it’s a dream come true and I feel blessed.

Public Library

Everything is free.

I don’t have to sell anything.

People come in because they want to be there.

I get to help people who want to be helped, or provide and environment where they can chill and relax.

They only owe money when stuff is late.

I’m a social worker. Currently I work with seniors who live alone with a disability and have no family to take care of them. I plan on getting my masters and becoming a therapist. After working construction for 8 years and getting a degree in business I said fuck it and followed my passion regardless of what everybody in my life said. I am so. Fucking. Glad. That i made that decision. It was really hard to get myself into the mindset that it’s not too late. Once I was there though, I wasn’t leaving. I put my foot down and was determined. Went to a community college, got 12 credits, working an entry level social work job and will be applying for my masters once this shit show of a pandemic is over… or maybe when i cave and decide to do online classes. Either way I feel like i’m living my dream, even though i’m not nearly where I want to be… yet.

Freelance illustrator and graphic designer.

I’ve always liked the idea of making things that are useful to people in any way, and I always try to apply this mentality into my work. Not to mention that stimulating my creativity is something I’ve always enjoyed, and something this line of work requires on a constant basis.

Of course, creative blocks are an issue occasionally, but it’s still something I truly enjoy.

I work for a grocery store and I am the person who picks out what specialty cheese, crackers, salamis and olives all our stores carry.

I’m currently a factory worker making sheet metal roofing and siding, it’s one of the easiest jobs I’ve ever had. The work is relatively repetitive, but there’s enough variation to keep it from getting boring. The people I work with are kind and funny, management actually gives a shit about us, and the benefits are fantastic. I love working manual labor, I could never have a desk job.

Marine engineer. I like solving problems, and the moment you figure out how to do something is a golden feeling.

Park ranger

I work for the national park service. I started off seasonal and got to visit 6 different national parks, getting paid to live peoples vacation and be in most beautiful places. Now I am settled permanently on The National Mall where i get to work with special events, getting to see first hand all the amazing events that go on in Washington dc and be apart of it all.

I have worked in zoos my entire career (mostly as a zookeeper) and now get to travel and work in conservation. Incredibly gratifying and truly feel I have never worked a day in my life with this career.

I’m a Medical Specialized Interpreter! (And also general one)

I like it that much that im mastering 2 other languages at the same time (Italian and French) to be an interpreter English- Italian-Spanish-French.

E-discovery. We help people deal with data and fact finding in litigation and investigations. It’s extremely stressful but every day is different. Every day is a new challenge. You have to constantly be learning and growing. The moment someone comes up with a new chat systen, or file system, or collaboration system you immediately have to understand how it works and how to forensically grab the data quickly. You have to know technology, law, statistics, and how to argue (a lot). It’s one of those business that has a steep learning curve that never really stops going up.

Physics in optics research. I have a massive selection of lenses, mirrors, and light sources, and I use them to measure non-uniform diffractive gratings (they basically just make a rainbow). It’s like a big lego set with no instructions, and I don’t really know what I’m looking for, but today my boss told me “having a lot of good ideas is better than knowing something for certain.” Love that shit.

Architecture during quarantine I was doing 60 to +90 hours a week. The only thing holding me was my passion for the profession.

Hair stylist! I chose this career instead of pursuing a career with my college degree. It allows me to be creative, work in a social environment, I can wear whatever I want, and I get to help people feel good about themselves when they look in the mirror!


Idk everyone sees it as something they want to get out of. I can see the wisdom in getting a career in a growing and stable field, but I honestly enjoy it. The craziness, the good guests the bad guests, people having fun being super inappropriate, people being pissed off for something that really doesn’t matter. It’s a lot of fun, and for the most part you’re in control over how much money you make. Even if I find a “big boy job” I’d still try and work some shifts at a bar or restaurant. Pay for groceries/gas and have fun doing it.

I’m a data analyst!

I set up and maintain a large amount of data flowing in to a database and process it so that it’s useable within BI tools and for machine learning projects.

Then after it’s in a good format I use BI tools to make cool visualizations so that a few couple hundred users who want different things from this data can all go in and be able to find what they need efficiently.

Sometimes I also get to do some machine learning projects!

IT inside a hospital. I go out if something breaks or we deploy PCs for new practices etc. Everyone appreciates me and the pay and benefits are great.

I teach history and government at a small rural high school. My students are extremely polite and respectful (it’s not often the younger generation calls their elders, “sir”), I love what I teach, and I get along with all of my co-workers.

Income Investing Investing

20 US Dividend Champions with Fastest Growing Dividends

Dividend champions are companies that have consistently increased dividends for at least 25 years.

The current full list includes over 100 stocks, some of which may be on their last legs soon to end their dividend streaks. Instead of providing the entire list, to make it more meaningful I cut it down to the companies that have grown their dividends the fastest over the past five years.

Fast dividend growth implies fast and sustainable cash-flow growth. No executive is going to grow dividends by 10, 15, 20% if they don’t think it can be sustained. So a fast rate of dividend growth gives me greater confidence in the future prospects for the companies.

US Dividend Champions: Highest 5yr Dividend Growth Rates

NameSymbolStreak YrsAug 31/20 PriceYieldQtly Div5yr Growth10yr Growth
A.O. Smith Corp.AOS26$48.971.96$0.2424.5721.50
Cintas Corp.CTAS37$333.240.77$2.5524.5718.43
Lowe’s CompaniesLOW58$164.691.46$0.6020.2319.39
Illinois Tool WorksITW46$197.552.31$1.1418.4612.62
Roper Technologies Inc.ROP27$427.190.48$0.5118.2518.81
NACCO IndustriesNC35$20.503.76$0.1917.9113.47
Franklin ResourcesBEN40$21.065.13$0.2716.7214.02
Hormel Foods Corp.HRL53$50.981.82$0.2316.0016.03
Sherwin-Williams Co.SHW42$671.050.80$1.3415.4912.28
Computer Services Inc.CSVI49$60.001.67$0.2515.4715.79
Lincoln Electric HoldingsLECO25$96.712.03$0.4915.3613.29
BancFirst Corp. OKBANF26$44.002.91$0.3213.9510.61
Carlisle CompaniesCSL44$130.951.60$0.5313.8811.07
S&P Global Inc.SPGI47$366.420.73$0.6713.709.74
Nordson Corp.NDSN57$186.490.84$0.3913.4814.51
Automatic Data Proc.ADP44$139.092.62$0.9113.3910.61
VF Corp.VFC47$65.752.92$0.4812.7613.04
Jack Henry & AssociatesJKHY30$165.421.04$0.4312.7016.75
Canadian National RailwayCNI25$104.581.66$0.4412.3313.77
Medtronic plcMDT43$107.472.16$0.5812.2010.23
Real Estate Wealth

What is the True Cost of a Reverse Mortgage?

If you own your home (i.e. mortgage free) and over age 60, you’ve likely seen ads for reverse mortgages. A 30 second ad can make a reverse mortgage appealing, however you must consider the true cost.

Note: For reference I’ve posted a couple ads below:

Essentially, a reverse mortgage is a loan (using your house as security) on which you don’t have to make re-payments. Instead, any interest accrued on the loan simply gets added to the principal. While the thought of not making payments can sound enticing, a reverse mortgage can be one of the more expensive ways to access money in retirement.

People get reverse mortgages to access the equity in their homes to pay off debt (including a pre-existing mortgage), cover medical expenses or make home modifications. Many use a reverse mortgage – as opposed to other forms of debt – because they don’t have to make payments until they (or their estate) sell their house. This frees up cash-flow. Homeowners are still expected to maintain the property and pay all property taxes and insurance costs, or risk foreclosure.

Before using a reverse mortgage, people must be aware of the total costs. I believe there are usually better alternatives.

First of all, the interest rates on reverse mortgages tend to be higher than conventional mortgages. Home Equity Bank sells the CHIP Reverse Mortgage and provides a bar chart that compares loan rates below. Based on the information they provide, the interest rate on reverse mortgages tends to be about double that of conventional mortgages, but cheaper than unsecured loans, credit cards, etc.

I frequently say reverse mortgages are expensive, but I’ll admit they’re still cheaper than some alternative forms of borrowing. However, there is more to the total cost than the interest rate alone.

Since you’re not making interest or principal payments on the loan, interest expenses get added to the principal. This is what really drives the cost of a reverse mortgage.

Effectively, as the mortgage compounds you pay interest on interest. In other words, the amount you owe grows at an exponential rate over time. The table below – again provided by Home Equity Bank – shows how a $150,000 loan becomes $204,939 in only five years at a 6.34% mortgage rate.

If we extend that scenario to ten years, the total amount owed becomes $282,299. That’s almost double the amount of cash originally received when the loan was originated.

The CHIP Reverse Mortgage allows homeowners to access up to 55% of the value of their house. So let’s imagine you’re sitting on a fully paid-off houses in Toronto worth $909,090. Using a CHIP reverse mortgage you can borrow $500,000. As you can see in the graphic below, in ten years, you owe $940,996 – more than the value of your home when you took out the loan.

Of course, during the decade the value of your home might also rise, in which case you would still have positive equity. Regardless, in the end you’re paying $1.82 back for every dollar you borrowed. As you can see, the cost of a reverse mortgage is almost equal to the amount of the original loan.

Some borrowers might not be bothered by this – in the end it’s not their loan to repay. At death, the estate will sell the house, repay the reverse mortgage and whatever’s left over will go to the deceased person’s heirs.

However, the family unit might not want to sacrifice a million-dollar asset in exchange for $500,000, while praying the house appreciates in value over time so there’s something left over. Despite the experience in Canada over the past couple decades, housing prices don’t always rise – just ask someone who owned a Toronto home in the 1990s.

A fully paid-off house represents your lifetime of sacrifice and effort. To swap it for half its value and hope to get something in the end is a waste and a gamble, in my opinion. While history has shown that real estate prices keep up with inflation, this should not be the expectation when getting a reverse mortgage. In my opinion, any form of borrowing should be made under the most conservative assumptions.

If you or anyone you know is considering a reverse mortgage, PLEASE be aware of the true costs. Get the family together and consider whether it makes more sense for other family members to help cover retirement expenses to help preserve ownership of the house within the family. If you must borrow, consider using a more conventional loan that gets repaid over time. This will help avoid the costs of compounding.

If there are no other alternatives consider selling the house.

In this case you’d get $909,090 today. (For simplicity’s sake, I’m not considering transaction costs of either selling or entering the mortgage.) The $500,000 could be used to fund retirement costs. The remaining $409,090 could be invested and withdrawn to pay for an apartment. If your investments earned 5% and you withdrew $2,000 per month for an apartment you’d still have $361,917 after ten years. Would you have this much in equity in your house in ten years? Maybe. Maybe not. The thing is the liability is a sure thing, the asset price is not. Of course, the value of the portfolio isn’t a sure thing either. However, it is liquid and that has value.

Finally, I think it could be a great idea to use the $409,090 to purchase a larger house so you can live with the rest of your family. The money then remains in the family (as opposed to paying rent to an outsider) and everyone is together.

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