ETFs and Funds

5 Top Dividend ETFs in Canada

Investing in Canadian dividend paying stocks has never been easier. To do this you can either buy one or two dozen individual stocks or you can buy an ETF that already owns a basket of dividend paying companies.

Of course, the convenience of buying an ETF comes with a small price. Between 10 and 60bps, the management expenses paid for simplified access do compound over time. Still, for many the ETF option makes the most sense.

Many people don’t have time to track many individual stocks. Some investors might have little to invest. Others might not even know what to look for when choosing an individual stock. For these people, an ETF might be the best way to invest in dividend stocks.

Personally, I like the way a broadly diversified dividend ETF can help me mitigate the risk of problems with any one individual company. An ETF also allows me to make asset allocation changes and new contributions with relatively few trades. Also, those who work in the investments industry know that ETFs remain off the compliance radar providing easier buy/sell execution.

I still bolt on a few individual dividend stocks here and there to enhance certain exposures. But ETFs remains the core to my dividend portfolio.

Below I list out five of the top dividend ETFs in Canada. I first provide high-level summary stats and then go deeper into each individual portfolio. Finally, I provide my conclusions at the end.

Summary Stats

NameBMO Canadian Dividend ETFiShares S&P/TSX Canadian Dividend Aristocrats Index ETFiShares Canadian Select Dividend Index ETFVanguard FTSE Canadian High Dividend Yield Index ETFiShares Core MSCI Canadian Quality Dividend Index ETF
Expense Ratio0.35%0.60%0.50%0.20%0.10%
% Financials33.88%25.26%59.85%58.30%56.42%
% Energy15.25%9.64%6.30%30.00%17.72%
% Top 1030.00%19.95%58.37%73.68%77.75%

BMO Canadian Dividend ETF (ZDV)

This ETF seeks to replicate the performance, net of expenses, of the Dow Jones Canada Select Dividend Index. The index is comprised of 30 of the highest yielding, dividend-paying companies in the Dow Jones Canada Total Market Index, as selected by Dow Jones using a rules-based methodology including an analysis of dividend growth, yield and average payout ratio.

Top 10 Holdings (30.00%)

iShares S&P/TSX Canadian Dividend Aristocrats Index ETF (CDZ)

This ETF seeks to replicate the performance, net of expenses, of the S&P/TSX Canadian Dividend Aristocrats index. The index consists of common stocks or income trusts listed on the Toronto Stock Exchange which are constituents of the S&P Canada Broad Market index (BMI). The security must have increased ordinary cash dividends every year for at least five consecutive years, and the float-adjusted market capitalization of the security, at the time of the review, must be at least C$ 300 million.

Top 10 Holdings (19.95%)

iShares Canadian Select Dividend Index ETF (XDV)

This ETF seeks to replicate the performance, net of expenses, of the Dow Jones Canada Select Dividend Index. The index is comprised of 30 of the highest yielding, dividend-paying companies in the Dow Jones Canada Total Market Index, as selected by Dow Jones using a rules-based methodology including an analysis of dividend growth, yield and average payout ratio.

Top 10 Holdings (58.37%)

Vanguard FTSE Canadian High Dividend Yield Index ETF (VDY)

This ETF seeks to track, to the extent reasonably possible and before fees and expenses, the performance of a broad Canadian equity index that measures the investment return of common stocks of Canadian companies that are characterized by high dividend yield. Currently, this ETF seeks to track the FTSE Canada High Dividend Yield Index. It invests primarily in common stocks of Canadian companies that pay dividends.

Top 10 Holdings (73.68%)

iShares Core MSCI Canadian Quality Dividend Index ETF (XDIV)

This ETF seeks to replicate, net of expenses, the performance of the MSCI Canada High Dividend Yield 10% Security Capped Index. The MSCI Canada High Dividend Yield 10% Security Capped Index targets companies from the Parent Index (excluding REITs) with high dividend income and quality characteristics and includes companies that have higher than average dividend yields that are expected to be both sustainable and persistent.

Top 10 Holdings (77.75%)


For your convenience, I’ve re-displayed the summary stats below:

NameBMO Canadian Dividend ETFiShares S&P/TSX Canadian Dividend Aristocrats Index ETFiShares Canadian Select Dividend Index ETFVanguard FTSE Canadian High Dividend Yield Index ETFiShares Core MSCI Canadian Quality Dividend Index ETF
Expense Ratio0.35%0.60%0.50%0.20%0.10%
% Financials33.88%25.26%59.85%58.30%56.42%
% Energy15.25%9.64%6.30%30.00%17.72%
% Top 1030.00%19.95%58.37%73.68%77.75%

Judging by the sector exposures, XDV, VDY and XDIV provide more concentrated exposure to financials. VDY provides concentrated exposure to both financials and energy. If you desire an ETF more focused on financials and energy, VDY and XDIV are probably your best choice because of their exceptionally low fees.

The remaining dividend ETFs – ZDV and CDZ – provide a more diversified exposure to Canadian dividend paying stocks across a wider range of sectors. Although ZDV is a bit more concentrated in financials and energy, this provides it a yield boost. Finally, ZDV also charges a lower fee, making it my preferred ETF for broad exposure to a wide variety of Canadian dividend paying stocks.


This Might Be Your Last Job

Last night I spent some time searching for old classmates and work colleagues on LinkedIn and Facebook. I just wanted to see what some people were up to, out of curiosity.

As you might expect, many were living their lives – having kids, travelling, developing their careers. However, I noticed something disturbing.

A huge proportion of people from my past have simply dropped off the face of the earth. I sort of expected this when scouring Facebook. Facebook is a cesspool and somewhat pointless, so many people quit. However, I didn’t expect to see people simply vanish from LinkedIn.

She went from jet-setting with executives around the world to homeless.

Where did they go?

While actual profiles were still up, it was clear that many have not made any changes to their accounts in years. These are people supposedly in the prime of their careers – aged between 40 and 55. While a handful might have died (morbid thought), the rest just went dark.

I did some detective work and discovered a common explanation. Many people in the finance industry in the prime of their careers who are laid off never recover. They simply go from being a valuable contributor with a great income and 20 years of remaining career…to nothing.

Some were laid off from long-held positions. Others were laid off after leaving behind solid tenure for a higher-level job only for it to not work out. All went from the prime of their careers to the abyss.

After getting the axe, some of my former colleagues tried to start a business (many failed), others accepted jobs far below their experience level. Many appear to be simply wearing down their severance and savings, possibly leaning on the kindness of others.

I’ve even heard of one high-powered senior marketing manager who ended up on the streets. She went from jet-setting with executives around the world to homeless.

It could happen to anyone

None of these people expected nor deserved this. They weren’t terrible at their jobs nor bad people. They simply were not liked by the right people or were just a number on a spreadsheet.

Due to circumstances outside of their control – and sometimes less than perfect relationship with a key industry influencer – these people became untouchable. Unfortunately, relationships seem to matter more than work quality. And those who didn’t nurture relationships with certain people lost career momentum. I’ve said this many times: the corporate world is for extroverts.

This is the sort of thing you might expect from the music or movie business. Many actors who were household names a decade ago are nowhere to be seen today. We so casually refer to them as ‘has-beens’ without realizing this is a terrible predicament to face, and one that could affect anyone in any industry. However, it appears especially common in the finance industry.

Don’t take this lightly

Once you get beyond a certain level, it becomes increasingly difficult to find a job. Unfortunately, middle-manager jobs aren’t plentiful and executive-level jobs only go to the chosen few. I can only imagine my colleagues’ combination of depression and desperation as they realized their careers were over.

If you are in your 40s or older, behave as if your current job might be your last. Let’s hope it’s not, but be prepared because I’ve seen the sad story repeat over and over.

Knowing your career might end sooner than expected, you need to aggressively save and build alternate income streams. Have a plan for if/when this happens to you. Don’t assume the path you’re currently on will be available to you for the rest of your working life. This might be your last job.


Where are the Black People in Finance?

I’ve worked in finance for 20 years. I could probably count the number of black men and women I’ve worked with using my two hands.

The number of black people in middle manager or senior roles? I’d only need one hand to count them.

8.9% of the Toronto population is black. Yet, the representation in the managerial and executive ranks of the Canadian finance industry is much less than 8.9%.

Systemic exclusion in the finance industry

I haven’t witnessed any blatant discrimination based on race. Quite the opposite – all of the financial institutions I’ve worked for had strict HR policies prohibiting discrimination in the workplace. Every year, most institutions make all their employees go through some form of online training to avoid these issues.

So where are the black people in finance?

Note the first sentence two paragraphs above: “I haven’t witnessed any blatant discrimination based on race.” I think 90% of people in my industry would say the same. This results in a paradox – the issue of systemic racism in the workplace is made worse because most people don’t think an issue even exists. This is a big problem because it causes people to misunderstand what’s actually happening.

Racism in the modern workplace has gone underground. It has become part of the plumbing that goes unnoticed, yet remains a core component of the overall system. Given the lack of black representation, it is fair to conclude that there exists some form of systemic discrimination in the world of finance. However, since it is systemic it is less visible and more persistent.

Don’t believe me? Next time you see a financial institution posting on social media about racial inclusion, take a look at that company’s board of directors and executive team. You’ll be hard pressed to find a single black, East Asian or South Asian person.

The system is set up against black people

One might argue that black people simply don’t even try to enter the world of finance, explaining why there is such little representation at the executive level. But why would they want to?

While it’s true that black people shouldn’t technically be discriminated against during the hiring process, there are plenty of other excuses for why a black person might not ‘fit the job requirements’ – aka ‘the mold’. Faced with this reality, many choose to avoid the industry altogether.

In contrast, white anglo-saxon protestants can drunk-stumble into finance jobs because their parents set them up, their friends work in the industry and they simply fit the mold. There is a finance archetype. Anyone outside of that clique needs to work extra hard to get in only to compete with people who were born with an advantage. So why the fuck would a black person even want to join that world in the first place? Who plays a game knowing the deck is stacked against them?

Since they don’t fit the mold, black people who do get into finance likely face – at a minimum – unconscious bias. While I haven’t seen anyone officially miss out on a promotion because of their race, I’ve seen it happen because people don’t fit the mold. The deviations from the mold can be very minor – someone’s attitude, mannerisms, clothing, hair, etc. stray 10% from the archetype. So if that archetype includes white skin, wouldn’t that be considered systemic racism?

It’s very hard to pinpoint an actual racist action within these modern corporations. However, I can tell you it’s happening by matter of deduction. But it’s done in a way that is so subtle even those perpetrating the discrimination probably don’t realize it.

Many executives subconsciously feel the finance industry is for outgoing, thin, clean cut white kids with well-off parents who could afford to send them to expensive universities and connect them with jobs. It’s these expectations of what’s normal that create an exclusionary environment for anyone that doesn’t fit the mold.

Most corporate leaders would argue vehemently they aren’t ‘racist’. Yet, this is what makes racism ‘systemic’. It’s often not a cold, conscious decision by an individual – it’s part of the process. It’s part of the ugly system.


The Destruction of America’s Middle Class

America was once a beacon of light for dreamers around the world. The land of opportunity presented a way for people to earn more money and increase living standards by joining the middle class.

Today, many can dream but never come close to the opportunity they were sold. So what happened to the American middle class dream? Why is wealth disparity and inequality widening?

America as a whole is far richer than it was a decade ago. But as a population – as individuals – for a troubling proportion it is getting poorer.

There are three potential explanations for why the American middle class has collapsed. I’ll briefly explain each and provide supporting graphics below.

  1. Deregulation: The deregulation of America since the early 1980s – a pillar of Reagan policy – systematically removed protections for American workers, transferring power (and wealth) to the owners of capital. This benefited the wealthy and corporations at the expense of average people. At the same time, automation and offshoring replaced jobs once performed by humans, further weakening labor and the middle class.
  2. Living Costs: A result of deregulation, costs for many services critical to one’s standard of living have risen disproportionately to incomes. Namely, health care and education costs have grown far faster than incomes, eroding the ability for average citizens to build and maintain the wealth required to be considered middle class.
  3. Weak Innovation: Since the Industrial Revolution, the combination of wealth generating innovations afforded society the flexibility to provide for all citizens on more equal terms. These innovations included electricity, combustion engine, refrigeration, indoor plumbing, telecommunications and computing. The great wealth derived from these innovations and their many offshoots meant that money could be pooled to raise the standard of living for all segments of the population, helping to create the middle class. Things changed towards the end of the 20th century. Since the 1970s, the American productivity growth rate has been on a secular decline. This is not to say new innovations don’t exist. Rather, today’s innovations don’t have the same revolutionary impacts as those from 50, 75, 100 years ago. Many of today’s innovations are incremental in nature, enhancing efficiency and lowering costs. However, humanity is still largely run on technology invented many decades ago.

Check out the charts below for details on this transformation:



Why Executives Want to End Work From Home

What if you could have 12.5% more life?

Most people agree that they are more productive working from home. Work gets done faster because there are fewer interruptions and people are allowed to prioritize without distraction.

Moreover, by working from home most people cut their commute by about 2 hours each day.

(Frankly, I’m not sure how I’ll ever deal with rush hour traffic again now that I’ve seen the other side.)

Assuming you sleep 8 hours a day, by cutting out your commute you gain 12.5% more quality free time. That is significant.

Although I won’t attempt to quantify it, you also gain time by being more productive working from home. Realistically, you’re gaining more than 2 hours a day (i.e. more than 12.5% extra quality free time).

This extra time is a life-changing gain you can reinvest in your work, side projects, hobbies or family. Used wisely, these time investments can help you generate a second income stream, improve family ties and live a more fulfilling life.

You gain more than time

In addition to time, working from home improves your health and saves you money. No more coffee room ambushes, late buses, face time, toilet searches or itchy pants. More time for working out, eating vegetables and hanging out with people you actually like. All this is good for you.

I haven’t eaten food court food in months.
I’m pretty sure I’ve added 5 years to my life.

Then there’s the money saved on lunch, dry cleaning, coffees and office attire. I’m barely trying and I’ve cut my spending in half. Working from home can help you reach your financial goals – emergency fund, retirement savings, financial freedom – much faster.

You get my point.

While there are some downsides to working from home, there are many upsides. This is why most people don’t want to return to the office.

So why do executives want to return to the office?

The only people I know who are really pumped about getting back to the office are executives or other people with senior ranks within an organization. This is because most executives are extroverts.

Extroverts are awarded extra points by society. They are automatically considered to have leadership qualities because they love to schmooze with people. Justified or not, for this reason extroverts tend to rise to the top of organizations.

Extroverts tend to get off on meetings, impromptu chats, after-work drinks and coffee dates. This is their key to success within an organization. Regardless of the quality of their deliverables, their extroversion helped them become likable, relatable and promotable ‘leaders’. Before we all started working from home, this was their game and they played it well.

The funny thing is some extroverts mistake talking and socializing as ‘work’. Sure, the talks might be related to work, but most are pointless circle-jerks that accomplish nothing. And many conversations or meetings that do accomplish something could have easily been replaced by a 5 minute email.

Many of these people thrive on the inefficiency of daily corporate bureaucratic life. Have you ever felt like you’ve had the same meeting over and over for months? This is the ‘more talk, less do’ strategy unconsciously driven by many extroverts. Of course, work does eventually get done. But my observation is that it gets done because it is delegated to disciplined introverts who value output over endless chats.

Working from home changes the game.

Suddenly, the formula for success is flipped upside-down. Without a channel to direct the incessant shit talk, those in your face extroverts fall apart and conscientious introverts are the ones keeping the company moving. Indeed, this is the opportunity for introverts to demonstrate where value is truly created.

When stuck behind a desk at home, many extroverts simply cannot function. If you don’t already know who they are, they are the ones who are booking all the virtual team meetings and conference calls. They’re trying to justify their existence in this new work from home world.

Note: For dramatic effect I’m probably being overly critical of extroverts. They do have a role to play and many do deliver fantastic results. However, I have particular ‘extroverts’ in mind as I write this article. You probably know a few that fit the description. But you probably also know a few that are truly genuine, caring people that make things happen. Also, not all introverts deliver. Some are totally useless and get tripped up by their own introspection.

Introverts: Use this opportunity wisely

While the corporate office environment is ideal for extroverts, the work from home environment evens the scale between introverts and extroverts. Now’s the chance for introverts to step up, deliver and show the world what they can do.

Create value for your business and promote your work. The chains are unshackled, so when emailing a new report (or whatever) CC a few more people than usual. Share it with all the people in your organization that might be interested.

At the same time, use this opportunity to break out of the introvert shell by speaking more on conference calls. It feels safer than in-person meetings, so do it. In fact, if you really feel inclined, book a few of your own calls to showcase your work.

Finally, don’t let the loudest, most talkative people at the company dominate the conversations. Let it be known how you’re benefiting from working from home and how it ultimately benefits the company. If the executives are the only ones speaking on behalf of staff, returning to the office will be the only option.

Income Investing

May 2020 US Dividend Increases

Corporate executives have an ability to send ‘signals’ to the market about the health of their organization. One such signal is dividend policy.

In particular, if a company increases its dividend – particularly in a bad economic environment – it signals management’s confidence in the company’s future prospects. It also indicates the company has the cash to continue paying its dividend.

If I’m going to invest in a company right now, I want to know that the company’s executives are confident. While I wouldn’t rely on this single factor to make an investing decision, I believe it provides good corroborating evidence for an investing thesis that might already exist.

May of 2020 was one of the worst months ever for the US economy. Yet there are a handful of large cap US companies that are increasing their dividends, which I have listed below:

(Best viewed on desktop)

May Dividend Increases (US Companies with Market Cap >$10b)

CompanyTickerNew Div% RaiseYield
American TowerAMT$1.101.85%1.91%
Northrop GrummanNOC$1.459.85%1.77%
Koninklijke PhilipsPHG$0.962.74%2.10%
Cardinal HealthCAH$0.491.02%3.69%
Franco NevadaFNV$0.264.00%0.70%
Microchip TechnologyMCHP$0.370.14%1.72%
KKR & CoKKR$0.148.00%2.00%
Pembina PipelinePBA$0.151.89%7.93%
FactSet Research SystemsFDS$0.776.94%1.20%
Ameriprise FinancialAMP$1.047.22%3.87%
TE ConnectivityTEL$0.484.35%2.76%
Thomson ReutersTRI$0.3832.40%2.19%
Expeditors Intl of WashingtonEXPD$0.524.00%1.40%
Baxter IntlBAX$0.2511.36%1.11%

11 Market Charts: Dividend Drawdown, V-Shapes, And More

Here are the top investing and economics charts and graphs from the previous week:

Market recovery of 2020 losses

Source: A Wealth of Common Sense

V-shaped economic recovery in China

Source: Invesco Canada

Former luxury brand consumers are now looking for a good bargain

luxury market supplemental
Source: Visual Capitalist

Tourism contributed $1.8 trillion to the US economy in 2019, 8.6% of GDP

Travel and tourism contribution to GDP in absolute terms
Source: Visual Capitalist

Spending at Big box stores doing alright

Source: Visual Capitalist

Dividend drawdowns throughout the past century

Source: A Wealth of Common Sense

Dividend drawdowns correlated to stock price declines, but not a 1 for 1 relationship

Source: A Wealth of Common Sense

Covid-19 was the 3rd leading cause of death in the US between February and May

Personal savings rate hits record high of 33%

Unemployment picture in the US starting to improve, believe it or not

Beer and wine sales skyrocketing in Canada

Real Estate

1989-1996 Canadian Housing Collapse Looks Eerily Similar to Today

I recently wrote a couple articles proposing that Canadian real estate might be on a downward spiral. So far it has declined 10% on average since February. Some parts of the GTA have already experienced declines of up to 18%.

Hundreds of thousands of Canadians have deferred their mortgages. While some may have done so fraudulently most were in genuine financial distress, as millions of Canadians suddenly lost their jobs.

Unfortunately, these deferrals simply kick the can down the road – payments are piling up as is the interest on the deferred interest. Many of these mortgages will enter default. Many people who can no longer afford their homes will sell. Overall, the supply-demand dynamic is changing for the worse.

CMHC recently issued a report saying Canadian home prices could decline by up to 25% by the end of 2020. Others researchers have argued for larger declines.

As expected, those with a vested interest have cast the CMHC report as inflammatory. Many Canadians simply are in denial that a significant housing decline could happen.

Very smart people are sometimes unable to see breaks from normality. Remember when Federal Reserve Chairman Ben Bernanke was in denial about the US housing collapse?

“Housing markets are cooling a bit. Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise.”

Ben Bernanke, February 15 2006.

Bernanke said this (and many other similar quotes suggesting housing market stability) right when the US housing market was collapsing.

Nobody has a crystal ball, but frankly I find it appalling – but not surprising – that people are so quick to dismiss the possibility of a similar significant decline in Canada. Especially given the weak economic and consumer fundamentals. The fact is it is very difficult for people to accept discontinuous breaks in their reality, just as many couldn’t in February when it was clear that Covid-19 was growing into a global pandemic.

None of this is new. Canada experienced a very similar situation 30 years ago when home prices declined between 1989 and 1996, taking 13 years to recover. At that time immigration didn’t help, falling rates didn’t help and reduced housing inventory didn’t help.

Today, I came across a great thread on Twitter by @ExtraGuac4Me. The thread showed that the same denials were happening in 1989 – right before housing fell by 28% on average.

I’ve pasted the thread in its entirety below:

Before dismissing CMHC’s report, consider this: in 1989, pre-recession, Wood Gundy suggested Toronto home prices would drop by 25%. TREB called the report “inflammatory” & OREA stated “a large price decline is unlikely because the real-estate market doesn’t work like that”


Mortgage rates then fell dramatically by over 500bps (5%!!) over the next few years. This was a significant drop in borrowing costs that cannot be understated.

And no, immigration did not fall in 1989. It went from about 191k in 1989 to 256k by 1993. Also, more immigrants chose major city centres in the 1990s compared to the 1980s. Yes, more immigrants came to Canada and even more went to the Toronto area.


In the end, despite increased immigration to Canada with more people moving to the Toronto area and a substantial reduction in interest rates, prices fell 25% with many condos facing 35%+ declines.


Get your free copy of my guide to surviving the economic crisis:

The Covid-19 economic crisis is gripping the world. After 20 years in the asset management business, it looks like we are fighting through unprecedented territory.

This is war. I created a 17 step, 47 page guide to help DumbWealth subscribers get through this.

I originally planned on printing the guide and selling copies for $20+. Instead I’m giving this away free because I think we all need to help each other during these difficult times.


25 Life Changing Dale Carnegie Quotes

Dale Carnegie was born in 1888 into poverty on a farm in Missouri. Over time he overcame his humble beginnings, eventually becoming a globally recognized American writer and lecturer.

He developed a number of courses and wrote numerous books on self-improvement, sales, interpersonal relations, public speaking and corporate life. His seminal work was a book called “How to Win Friends and Influence People”, a bestseller that remains popular today.

His work has inspired millions to become more effective and successful at work and life. Below are 25 of his most influential quotes:

  1. “It isn’t what you have or who you are or where you are or what you are doing that makes you happy or unhappy. It is what you think about it.”
  1. “Don’t be afraid of enemies who attack you. Be afraid of the friends who flatter you.”
  1. “Develop success from failures. Discouragement and failure are two of the surest stepping stones to success.”
  1. “You can make more friends in two months by becoming interested in other people than you can in two years by trying to get other people interested in you.”
  1. “Any fool can criticize, complain, and condemn—and most fools do. But it takes character and self-control to be understanding and forgiving.”
  1. “When dealing with people, remember you are not dealing with creatures of logic, but with creatures bristling with prejudice and motivated by pride and vanity.”
  1. “Success is getting what you want…Happiness is wanting what you get.”
  1. “Everybody in the world is seeking happiness—and there is one sure way to find it. That is by controlling your thoughts. Happiness doesn’t depend on outward conditions. It depends on inner conditions.”
  1. “Most of the important things in the world have been accomplished by people who have kept on trying when there seemed to be no hope at all.”
  1. “When we hate our enemies, we are giving them power over us: power over our sleep, our appetites, our blood pressure, our health, and our happiness.”
  1. “People rarely succeed unless they have fun in what they are doing.”
  1. “Remember, today is the tomorrow you worried about yesterday. ”
  1. “Talk to someone about themselves and they’ll listen for hours.”
  1. “If you are not in the process of becoming the person you want to be, you are automatically engaged in becoming the person you don’t want to be. ”
  1. “Be wiser than other people if you can; but do not tell them so.”
  1. “Actions speak louder than words, and a smile says, ‘I like you. You make me happy. I am glad to see you.”
  1. “Our thoughts make us what we are.”
  1. “Knowledge isn’t power until it is applied.”
  1. “The best possible way to prepare for tomorrow is to concentrate with all your intelligence, all your enthusiasm, on doing today’s work superbly today. That is the only possible way you can prepare for the future.”
  1. “Nothing can bring you peace but yourself.”
  1. “You can conquer almost any fear if you will only make up your mind to do so. For remember, fear doesn’t exist anywhere except in the mind.”
  1. “Be more concerned with your character than with your reputation, for your character is what you are, while your reputation is merely what others think you are.”
  1. “One reason why birds and horses are not unhappy is because they are not trying to impress other birds and horses.”
  1. “One of the tragic things I know about human nature is that all of us tend to put off living. We are all dreaming of some magical rose garden over the horizon – instead of enjoying the roses that are blooming outside our windows today.”
  1. “You can’t win an argument. You can’t because if you lose it, you lose it; and if you win it, you lose it.”

ETFs and Funds Income Investing Investing

3 Canadian Preferred Share ETFs for Steady Income

I’ve met many people over the years who love their dividend stocks. They buy Canadian staples like Royal Bank, TD, BCE and Enbridge for their consistent, growing (usually) dividends.

If you’re an income investor, there’s nothing wrong with this for the equity portion of your portfolio. But there’s a way to get the fixed income side working harder – by using preferred shares.

Preferred shares are hybrid securities that pay dividends (often fixed). Preferred share dividends must be paid out before common share dividends, making them a more reliable source of income.

In the event of a dissolution or liquidation of the issuer, preferred shareholders’ claims on assets are senior to common shareholders but behind debt holders.

The share price of preferred shares can change significantly but tends to be more stable than common equities. This is a positive and a negative, depending on how you look at it. Preferred shares don’t participate in the upside profits from ownership of the company and usually have no voting rights unlike common shares. However, they might decline less than common equities from the same issuer in down markets.

Because preferred shares are often redeemable at a specified par value and pay a fixed dividend, they can have similar characteristics to bonds. Namely, they are more interest rate sensitive than common shares. Because of this, at times the prices of preferred shares can move in different directions to their common stock counterparts.

A big benefit over corporate bonds for Canadian investors using non-registered accounts is certain Canadian preferred shares are eligible for the dividend tax credit. (I.e. a 5% yield on an eligible Canadian preferred share is worth more after tax than 5% on a similar bond.) Another advantage over bonds is the higher pre-tax yield. Of course, this is because bonds are ranked higher in a company’s capital structure and tend to be less volatile.

As you can see, preferred shares are an asset class that belongs somewhere between stocks and bonds. As such, they can be used to fine tune a portfolio potentially replacing some of the equity or corporate bond portion, depending on an investor’s individual situation.

Warning: Over the long-run you’d probably be better off NOT using preferred shares as an equity substitute. They don’t participate in the upside – that’s a big tradeoff for an investor with a long time horizon.

There is a lot to look for when buying individual preferred shares:

  • Credit quality
  • Yield to call/redemption
  • Liquidity
  • Term to maturity – perpetual vs retractable
  • Payment provisions – fixed, floating, re-settable
  • Dividend policy – cumulative vs. non-cumulative
  • Other features

Ideally, a portfolio of preferred shares is diversified by issuer and type. Quite frankly the dumb/lazy investor like myself has no time or energy for this kind of research and maintenance. Instead, I prefer to use an ETF.

Below I’ve listed 3 of the largest preferred share ETFs that are traded on the TSX:

iShares S&P/TSX Canadian Preferred Share ETF (CPD)

This ETF provides exposure to a diversified portfolio of Canadian preferred shares and can be used to diversify sources of income beyond traditional government bonds and GICs.

Key facts (as at May 25, 2020):

  • Yield: 6.05% (trailing 12mth distribution yield)
  • Distribution Frequency: Monthly
  • Top 3 Sectors: Banks (35.83%), Insurance (20.98%), Energy (15.67%)
  • Management Fee: 0.45%

RBC Canadian Preferred Share ETF (RPF)

This ETF provides access to a diversified portfolio of rate-reset preferreds in a single ETF. The ETF is actively managed by investment teams with expertise in company-level fundamental research, credit analysis and interest rate forecasting.

Key Facts (as at May 25, 2020):

  • Yield: 6.81% (dividend yield)
  • Distribution Frequency: Monthly
  • Top 3 Sectors: Financials (59.70%), Energy (22.60%), Utilities (14.80%)
  • Management Fee: 0.53%

BMO Laddered Preferred Share Index ETF (ZPR)

This ETF is designed for investors looking for higher income from their portfolios. The ETF invests in a diversified portfolio of rate reset preferred shares and has lower interest rate sensitivity than the full preferred share market.

Key Facts (as at May 15, 2020):

  • Yield: 6.81% (distribution yield)
  • Distribution Frequency: Monthly
  • Top 3 Sectors (May 25, 2020): Diversified Banks (39.17%), Oil & Gas Storage and Transportation (21.43%), Life & Health Insurance (7.53%)
  • Management Fee: 0.45%
Real Estate Wealth

Canadian Housing Prices Down 10% Since Feb

Canadians aren’t working.

Employment has collapsed, as much of Canada slowly emerges from Covid-19 quarantines. In fact, the number of employed persons in Canada is near a 15 year low (see chart below).

This probably underestimates the problem because it doesn’t include people who are still technically employed but not receiving a paycheque. Many of these people will undoubtedly be added to the unemployment rosters soon.

Canada Employed Persons

It’s no secret that Canadian households are up to their eyeballs in debt. Debt requires money to service, making Canadians highly vulnerable to a negative change to their incomes. The current change is probably the worst we’ve ever seen, putting all forms of household debt at risk of default.

Hundreds of thousands of Canadians suddenly can’t pay their debts and have deferred their mortgages as a result – especially in Quebec, Alberta and Ontario (see chart below). But as I explained in a previous article a mortgage deferral is not a free lunch. The deferred payments are simply adding to what the borrower already owes. (In case you weren’t paying attention, that includes interest on deferred interest.)

All mortgage deferrals do is delay the inevitable. The ability for Canadians to start paying their mortgages again in the future is dependent on employment picking up very quickly. Unfortunately, this doesn’t seem likely. It could take several years for joblessness to shrink back to pre-Covid-19 levels.

The massive volume of mortgage deferrals is a stark warning sign: The Canadian housing market is on the verge of collapse, and with it the Canadian economy.

Simply put, when people can’t pay their mortgages, either they sell and become renters or the bank forecloses and sells the property for them. Either way, a lot more distressed sales enter the market, putting downward pressure on prices. Couple this with a dearth of buyers – due to general economic weakness – and housing inventories rise, again pushing prices down.

It’s only been 3 months and housing prices in Canada area already down 10% across the board. Some parts of Toronto are already down 18%.

While these numbers might not sound huge, they are. A 10-18% change within 3 months is massive! Unless the unemployment situation resolves quickly, by the end of 2020 prices could be down 20-30% across the board.

This isn’t just a housing market issue. The entire Canadian economy is overly dependent on housing and housing-related activity to drive GDP growth. A housing slump will be felt across the entire Canadian economy, with the drag lasting for years.

Ironically, if the housing market declines significantly it will open the door to home ownership to Millennials and Gen Z, which until now were locked out of the market.

Small Business

Free Websites for Toronto Small Businesses

If you run a small business in Toronto, check this out:

Here are the details:

Leveraging Toronto’s technology community, the City of Toronto and Digital Main Street have brought together a range of partners to build and optimize online stores for Toronto’s independent businesses and artists at no-cost.

Thanks to volunteer developers, business students, and corporate partners, Toronto’s independent small businesses and artists can access ShopHERE to get their online store built and launched with hands-on support throughout the entire process in just a matter of days.

What do you get:

Choice of an online store customized with their information, branding, logo, etc.

Hands-on assistance setting up and launching their online store.

Training to support their online store, including topics such as digital marketing, shipping and inventory management.

Access to free tools to help support the launch of their online stores.

Here are the requirements:

Be a business located or artist in the City of Toronto that:

  • Pays commercial property taxes in the City of Toronto (rents or owns commercial property)
  • Have fewer than 10 employees or fewer than 25 employees if they are a restaurant or bar
  • Not be a corporate chain or franchise
  • Or must be an artist located within the City of Toronto

Learn more or sign up here.

Small Business

7 Opportunities for Entrepreneurs Right Now

With change comes opportunity. Look, I’m not making light of the tragic situation. Over 96,000 Americans are dead because of the current Covid-19 pandemic. Many more will die.

However, we still need to make a living. And now is a good time to consider the opportunities opening up due to the massive upheaval the world has just experienced.

Before I continue, in no way do I suggest taking advantage of shortages or vulnerable people. Quite the opposite – I think there is opportunity for entrepreneurs to genuinely help people and businesses impacted by the changed world.

Consider this a brainstorm session. I won’t get deep into the pros, cons, feasibility of each idea. But I hope to kick start some ideas that you can run with and make your own.

If you have any of your own stories, please share them. I’d love to learn more about what you’re doing.

Here are some quick ideas. I’m just dumping them on the page as I enjoy an adult beverage. No editing. No second-guessing. (So please excuse the mess…hopefully a string of words below sparks something in you.)

1) Masks

I’m not talking about hoarding or flipping medical n95 masks. Those need to go directly to medical staff.

Instead, I think there is a big opportunity to create and sell cloth-based masks for the general public. Suddenly, a new product category exists and is ripe for innovation.

What can be done to add value to the mask, which is generally viewed as a commodity? We’ve already seen the plain black masks, but where are the designs? Where is the branding? The differentiation? Hmmm…

2) Virtual events, entertainment, tourism

Large jam-packed events – like conferences and concerts – aren’t coming back anytime soon. Even smaller in-person events are likely to decline in frequency, as business travel wanes and people remain hesitant to meet in person any more than necessary.

There are many existing companies that got into the virtual events business almost overnight. These companies probably could use help.

There is also an opportunity to build and promote your own virtual events. Because overhead costs (e.g. space rental) have been slashed, virtual events require fewer attendees and can be profitable with smaller audience sizes and fewer sponsorships. This creates the opportunity for smaller highly targeted events. At the same time, the potential audience for a single event has suddenly gone global – anyone with a good internet connection is now a potential attendee.

Finally, the total cost to attend conferences (beyond event tickets) has dramatically fallen, opening up the option to audiences that were previously out of reach.

3) Servicing remote workers

A huge segment of the workforce is now working from home. Many of those people will never return to a normal office again.

After a while, sitting at the kitchen table in your pajamas gets real old. People need a proper physical space with proper ergonomic equipment. But what else will people need when working from home? What are the new problems these folks will need help with? Possibly, time management, segmenting work from home, new home distractions, social isolation, new methods for staying relevant, etc.

Businesses that manage a remote workforce will also need help working through the implications. What are the best practices? Will any intermediaries be needed? What tools are needed? What business challenges arise?

Essentially, new situations create new problems that require new solutions.

4) Retail

Retail?!? Yes…and that’s not the gin talking.

Some big retailers with a lot of cash and access to credit will stay afloat during the Covid-19 economic disaster. Unfortunately, many other retailers will die – either voluntarily or via bankruptcy. As this happens, the bigger, stronger retailers are salivating at the market share they will get to absorb.

The CEO of Macy’s recently said that $10 billion of retail sales will be up for grabs. Why should Amazon and Wal-Mart be the only beneficiaries?

Customers will be in transition. Brands will disappear. Regional competition will fall in areas. Surviving small retailers will need help. Commercial real estate rents might decline in areas. More retailers will need an online presence and delivery options.

You’d think there’d be a few opportunities for new ideas. Amirite?

5) Virtual everything

Every brick-and-mortar business has started providing online services in some way. While most people are familiar with online shopping, until now few would have ever considered online fitness classes, therapy sessions or doctor visits. Yet, that’s what we’ve all been doing for months now.

I think many will continue to use virtual services in the future for the convenience. Who wants to waste 2 hours going to the doctor’s office (and paying for parking) just to get a prescription refill?

So businesses that previously required an expensive physical presence can now be created in a basement. Suddenly, the barriers to starting many types of small businesses have fallen.

6) Online learning

This one’s simple. Do you have something to teach? Then build a brand and teach it using the multiple avenues available online. Videos, subscriptions, online teaching platforms, etc.

People have been warming up to online learning for a while, but I think the lock-downs have only accelerated this trend. The entire public school and college system has gone online, legitimizing what was once considered ‘alternative’.

While traditional brick-and-mortar institutions have the brand value, they also come with an enormous price tag. People have increasingly questioned the ROI of college education. Now, with the realization that most of the glitzy peripherals isn’t core to the college education, the door is open to new 100% virtual educational providers.

7) Homesteading

Previously, people that bought skids of T.P. and canned soup were called preppers. Today, we’re all preppers, aren’t we?

This all started with the Great Toilet Paper Panic back in March. Now we’re all baking sour dough and starting vegetable gardens. I think people have discovered the comfort in having a few life skills, and many will become lifelong closet homesteaders.

What can you offer those who want to make their own wine or repair a broken fence? How can you help them achieve their objectives? What would you need if you were starting a new hobby?


OK guys. Brainstorm’s over. Take what you want and discard the rest. Ideas are connected, so think about the second and third order effects of some of the problems and opportunities described above.

Perhaps more importantly, start fast and start small. Learn whether you can make $1. Because if you can make $1 you might be able to make $10, $1000, $100,000 and so on. Better to fail fast and find out early.