January 31, 2024 • 29 mins
In this episode, I cover 5 Canadian banks that have been paying dividends for more than 100 years.
I cover the following topics in this episode:
- What are dividends?
- How to make money with dividends
- Over 100 years of dividend payments
- Dividend consistency is key
- 2007-2008 financial crisis
- 5 Canadian bank dividend's during 2008-2010
- Our approach to dividend investing
Link to DividendPower's blog post: https://www.dividendpower.org/canadian-100-years-dividends/
Disclaimer: The views and opinions shared on this channel are for informational and educational purposes only. Simply Investing Incorporated nor the author and guests shall be liable for any loss of profit or any commercial damages, including but not limited to incidental, special, consequential, or other damages. Investors should confirm any data before making stock buy/sell decisions. Our staff and editor may hold at any given time securities mentioned in this video/course/report/presentation/platform. The final decision to buy or sell any stock is yours; please do your own due diligence. Stock buy or sell decisions are based on many factors including your own risk tolerance. When in doubt please consult a professional advisor. No advice on the buying and selling of specific securities is provided. All trademarks, trade names, or logos mentioned or used are the property of their respective owners. For our full legal disclaimer, please visit our website.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
In this episode we'll look at the five largest
Canadian banks that have beenpaying dividends for over 100
years.
When it comes to dividendinvesting, consistency is key.
Hi, my name is Kanwal Sarai andwelcome to the Simply Investing
Dividend Podcast.
(00:21):
A quick special thanks to myfriend at dividendpowerorg for
inspiring me to make thisepisode today.
I'm going to put a link downbelow in the description to a
blog article that he recentlywrote about Canadian companies
that have been paying dividendsfor over 100 years.
So thanks again todividendpower.
(00:43):
Now let's get started with ourepisode Today.
I'm going to cover four topics,and the first topic is going to
be what are dividends?
So a quick review.
The next topic will look at howto make money with dividends,
with a real-life example usingone of the Canadian banks.
The third topic is going to belooking at the list of the five
(01:07):
Canadian banks that have beenpaying dividends for more than
100 years, and the fourth topicis to look at the importance of
consistent dividends as theycome in.
So let's get started with topicnumber one what are dividends?
So dividends are essentiallythe company sharing its profits
(01:30):
with you, the shareholder, andin this example, let's say, a
company is paying a dividend of$1 per share and you own a
thousand shares, you willreceive $1,000 every year for as
long as you own those sharesand as long as the company
continues to pay the dividend,regardless of the stock price.
Stock prices go up and down allthe time, but the dividends are
(01:53):
paid based on the number ofshares you own and the money is
deposited directly into yourtrading account as cash.
So you can spend that money ifyou wish.
You can spend those dividendsor you can reinvest them back
into other stocks that paydividends, and that's a great
way to compound your dividendgrowth.
(02:14):
So now let's move on to ournext topic then.
So how do you make money withdividends?
So there's two ways.
Number one, of course, iscollecting the dividend itself
and, like I said before, thedividend is going to be paid
based on the number of sharesyou own.
And then the second mostimportant thing here is the
(02:36):
dividend increases.
So every time a companyincreases its dividend, that's
more money in your pocket.
Now, looking at our example wejust looked at earlier, if a
company is paying a dividend of$1 per share and you own a
thousand shares, you'll get$1,000 every year for as long as
you own those shares, but ifthe company increases that
(02:57):
dividend to, let's say, $2 ashare, then you're going to
start earning $2,000 a year onthose dividends that you own.
So every time the dividend goesup, more money goes into your
pocket.
So now let's take a look at areal life example which
illustrates the power ofcollecting dividends over time
(03:20):
and having those dividendsincrease over time as well.
So we're going to look at aCanadian bank, cbc.
This is the fifth largest bankin Canada.
They were founded in 1867.
They have a little over 48,000employees and a market cap, as
of this recording, is a littleover $57 billion.
(03:43):
So let's take a look at thisexample.
Let's say in 2010, you had$9,585 to invest and let's say
you put that in CIBC shares andyou can see on the screen the
share price at the time was$31.95.
(04:03):
And let's say you purchased 300shares.
So we multiply the 300 sharesby the share price back in 2010.
And you can see that your totalinvestment at the time would
have been $9,585.
Now let's take a look at whatwould have happened to that
(04:24):
investment.
Would it have grown over timeor would it have gone down?
So now we're going to take alook at this example with CIBC.
So you can see on the screenthere's a lot of numbers here,
but I'm going to go through themstep by step and you can see
that back in 2010, the companywas paying a dividend of $1.74 a
(04:46):
share, and that's an annualdividend per share.
You can see that the followingyear the dividend went up.
The year after that it went upagain.
In fact, the dividend has goneup every single year for the
last 14 years consecutively andtoday, as of this recording, the
dividend is now $3.60 a share.
(05:09):
Now let's go back to 2010.
So you can see that the sharewas $1.74 and the stock price,
the purchase price, was $31.95 ashare.
So we're going to do somesimple math here.
We're going to take thedividend at the time divided by
the purchase price and we'regoing to express that as a
(05:30):
percentage, and you can see onthe screen that it is 5.45%.
So what does that really mean?
That's the dividend yield.
So that means that is yourreturn on investment while you
hold on to those shares.
And again, stock prices can goup and down all the time, but in
(05:50):
this example, your purchaseprice back in 2010 was $31.95.
So that's not going to change,and the dividend back then was
$1.74, so that's not going tochange either.
So the return on yourinvestment back then was 5.45%.
And what does that mean?
Well, we take 5.45% of yourinitial investment, which was
(06:15):
$9,585.
And if you do the math, you cansee that in the first year you
would have received $522 individends.
So that's essentially 5.4% ofyour initial investment, right?
So that's how much money youwould have gotten in dividends
back then.
Now you can see all the numbersfor the last 14 years, but
(06:37):
we're going to fast forward to2024.
So you can see the dividend hasnow gone up to $3.60.
We divide that by the purchaseprice and you can see that your
dividend yield based on yourpurchase price today is a little
over 11%.
And so today, in this year, youwould receive a little over
(06:58):
$1,000 in dividends.
So you can see, in 2010, youwere only making $522 a year in
dividends.
Now you would be making alittle over $1,000 in dividends
from the same investment.
Remember, you didn't buy moreshares, you didn't increase your
capital investment.
(07:18):
That stayed the same, and youstill own the same 300 shares in
this example.
Now, if we add up all thedividends received since 2010,.
Just from this investment alone, you can see that it is over
$11,300 in dividends.
So that's pretty remarkableBecause, keep in mind, your
(07:39):
initial investment was $9,585.
So, just from the dividendsalone, you have more than made
up covered your capitalinvestment.
So the risk now for thisinvestment in this example, for
you the risk would be zeroBecause you've already made your
money back and more.
(08:01):
I haven't checked the stockprice today.
I think recently it was tradingat $62 a share.
Do you really care if it dropsto maybe $58 tomorrow or $50
tomorrow?
Not really, Because, again, therisk to you in this example has
gone down to zero.
You've already received thedividends, have covered all of
(08:22):
your initial capital investment.
And so now we look at thisexample as of this recording
taking the share price today.
Of course, the shares have goneup in price as well, including
all the dividends earned since2010, you can see that your
initial investment of $9,585would be worth almost $30,000
(08:45):
today, so that's pretty good.
Even better is, 38% of that hascome from the dividends, so
that's huge.
That is a huge portion of thetotal return on your investment,
so that's pretty good.
We've also seen other studentswho have taken the Simply
Investing Course dividendinvestors who are making today
(09:08):
$5,000 a year in dividends.
Some of them are making $20,000.
Some are making $60,000 a yearin dividend income alone.
So the important thing here isthat it takes time for the
dividend growth to kick in,because you can see, year by
year, the increase isincremental, right?
The dividend goes up by acouple of pennies maybe 50 cents
(09:31):
, 20 cents.
That's not a huge increase, butover time those increases will
add up and as you collect thedividends, your dividend yield
will go up and, as we saw in theexample with CIBC, you would
now be earning double digitreturns every year just for
holding on to those shares.
Now I know some of you andrecently there's been some talk
(09:54):
in the news about some dividendreductions and elimination of
the dividend, where the companyhas stopped giving a dividend,
and this is an importantstatement.
So dividends are not guaranteed.
Companies are under no legalobligation to pay you a dividend
, so they can reduce thedividend any time they want or
(10:15):
they can eliminate it altogetherany time they want, and we saw
that during COVID in March of2020, when companies like Boeing
, disney, general Motorscompletely eliminated the
dividend.
So if dividends are notguaranteed, then how do you have
any confidence in investing individend stocks?
(10:37):
So the important thing here isthat we wanna look at a
company's track record.
How long have they been payingthe dividend?
Have they been increasing thedividend?
Has it been five years, 10years, 20, 30, 40, 50 years?
How long has it been?
Because the better the trackrecord, the more confidence we
(10:58):
can have in the future that thecompany will continue to pay the
dividend.
So that brings us to the thirdtopic in our episode today,
which is we're now gonna look atthe five largest banks in
Canada that have been payingdividends for more than a
hundred years.
So that is an impressive trackrecord.
(11:20):
So let's get started.
We're gonna start with thefirst company on our list, which
is Bank of Montreal.
This is a large bank.
All of these banks operate inthe United States as well, and
in other countries as well,outside of Canada.
We're gonna start with Bank ofMontreal because they have been
paying the dividend for thelongest time, since 1829.
(11:43):
The second longest is Bank ofNova Scotia 1833.
Then we go to the TorontoDominion Bank.
The TD Bank has been paying adividend since 1856.
And then our CIBC Bank that wewere looking at has been paying
a dividend since 1868.
And finally, the Royal Bank ofCanada has been paying a
(12:07):
dividend since 1870.
So this is an impressive trackrecord.
Let's take a look at each ofthese banks one by one, so we're
gonna go in the same order withthe company that started paying
the dividend first and thenwork our way down.
So the first company on ourlist is Bank of Montreal,
(12:29):
founded in 1817, has over 55,000employees, a market cap, as of
this recording, of about $93billion, and it is the third
largest bank in Canada by marketcap.
Bank of Montreal has beenpaying a dividend for 195 years.
(12:49):
So I'm gonna say that again,because this is important they
have been paying a dividend for195 years and they started in
1829.
So that is an impressive trackrecord and one that's important
to us as dividend investors,because we rely on the dividends
(13:10):
to provide us with a source ofinvestment income.
Let's move on to our next bank,which is Scotia Bank.
They are the fourth largestbank in Canada by market cap.
The bank was founded in 1832.
They have a little over 89,000employees, market cap is over
$76 billion and they've beenpaying a dividend for 191 years,
(13:36):
since 1833.
Let's move on to TD Bank, thesecond largest bank in Canada by
market cap, founded in 1855.
They have a little over 103,000employees, a market cap of over
$149 billion and they've beenpaying a dividend for 168 years,
since 1856.
(13:59):
And let's move on to CIBC,which we covered a little
earlier in this episode is thefifth largest bank in Canada by
market cap, founded in 1867,over 48,000 employees, market
cap of $57 billion, and they'vebeen paying a dividend for 156
(14:19):
years, since 1868.
Think about how many marketrecessions, how many market
crashes we've had in the last100 years.
Think about even recently withCOVID, march of 2020, when the
market tanked with 2008,.
2009 financial crisis.
The market tanked In 1911, theNew York Stock Exchange was
(14:42):
closed for a number of days andthe markets tanked.
So history is full of instancesin events in the world that
have caused stock markets todecline, but yet companies like
these have been paying dividendsfor almost well.
(15:03):
If we look at Bank of Montreal,almost 200 years of paying
dividends.
So that's an incredible trackrecord.
Let's get on to our last bankon the list here, which is the
Royal Bank of Canada, rbc.
They are the largest bank inCanada by market cap.
Their market cap is a littleover 186 billion dollars.
(15:23):
They were founded in 1864.
They have over 91,000 employeesand they've been paying a
dividend for 154 years, since1870.
So there you have it.
You can see on the screen.
We've got all the five bankslisted.
Bank of Montreal is on its wayto all over almost 200 years of
(15:48):
dividends, right there at 195.
So let's wait a couple moreyears and they'll be.
If they continue to pay thedividend, they'll surpass the
200 year mark.
Bank of Nova Scotia is insecond place at 191 years of
dividend increases.
So that is again an impressivetrack record.
(16:10):
What's important here toremember is the consistency of
the dividend, because it makesit more reliable.
Right, and that's our lasttopic in today's episode, is
consistency, and what does thatgive us?
What does that provide us?
It provides us with confidenceas dividend investors when we
(16:30):
look at that.
It gives us confidence thatthese companies will continue to
pay dividends to us in thefuture and hopefully increase
them.
I'm going to give you a realquick example to illustrate the
importance of consistency.
So if we were looking at twocompanies to invest in, company
A and company B, you can see upon the screen.
(16:50):
We're going to keep thisexample, real simple Stock price
is the same, the dividend isthe same, payout ratio is the
same, the debt is the same, soeverything else is the same.
Let's assume they're in thesame industry, in the same
sector.
So, all things considered equal, which company would you invest
in?
Company A or company B?
Now, there's one differenceCompany A has been paying a
(17:14):
dividend since 1874.
So 150 years of payingdividends.
Company B just started paying adividend three years ago, in
2021.
So which company are you goingto invest your hard-earned money
in?
Assuming all things considered,equal, right?
So company A is going to beprobably a safer option to
(17:36):
invest in Because they've beenpaying a dividend for 150 years.
We don't know what's going tohappen with company B next year.
Are they going to still pay thedividend?
Are they going to reduce it?
Are they going to eliminate italtogether?
Will they pay us a dividend forthe next 5, 10, 15, 20, 30
years?
We don't know, but company Agives us the confidence that
(17:58):
they will continue to pay thedividend.
Let's take a look at a veryspecific example.
I want to take you through aspecific example in 2008, the
financial crisis, because nowwe're going to take a look at
the five Canadian banks and seehow well or how poorly they
performed back in 2008.
(18:19):
For those of you old enough toremember, 2008 was not a good
time for banks.
We had a number of banks in theUS go bankrupt, completely gone
.
Washington Mutual is one of themost famous examples, and the
bank just went bankrupt InCanada.
The five banks were kind of ina similar situation Not bankrupt
(18:42):
, but not doing well.
Here's a graph up on the screenthe stock price chart for a
Royal Bank of Canada.
So this is the largest bank inCanada and you can see that in
2007, the stock was trading at$60 a share and then, by the
time we get to 2009, it's halfthat price.
It's trading at $29.
(19:03):
So if you were just looking atthe stock price, this would be
terrible and we're not going toshow it here in this episode.
But you can look at the otherfour banks the Canadian banks
that we talked about today, andtheir stock price graph looks
identical.
They all went down.
2008 was not a good time forbanks and all those prices came
(19:27):
down.
So let's take a look now at thedividend, because, as dividend
investors, that's our focus.
Our priority is the dividend,not the stock price.
So now let's take a look at howthe dividend did during one of
the worst periods in history forbanks.
So we're going to start withBank of Montreal.
(19:48):
Okay, we're going the sameorder with the five banks that
we just looked at.
So we're going to start withBank of Montreal, and you can
see up on the screen in 2007,the dividend was $2.71.
In 2008, they increased thedividend, but then in 2008 was
when all of the financial crisis, the problems started.
(20:08):
So what the bank did is theydidn't Cut the dividend, which
is good for us as dividendinvestors, and they didn't
reduce the dividend, which isalso not good for dividend
investors.
So there was no reduction andthere was no elimination of the
dividend.
They just kept it the same.
So you can see, in 2009, thedividend didn't change.
In 2010, the dividend didn'tchange.
(20:30):
In 2011, the dividend didn'tchange.
Now most people would think,well, I'm going to sell the
stock, the dividends goingnowhere, right, and in hindsight
, that would have been the wrongapproach.
If you just held on and Stuckwith it, you could see that in
2012, the dividend went up notby much, it's only a two cents
(20:55):
but then into 2013, the dividendwent up again, and then it went
up again and then, ever since2012, the dividend has gone up
every single year, consecutivelyfor 12 years, and now we fast
forward to 2024.
As of this recording, you cansee that the dividend is $6.04.
So that is pretty impressive.
(21:17):
It is a hundred twenty threepercent increase since 2007.
Now let's take a look at Bank ofNova Scotia.
You'll see a similar trend.
You'll see in 2007 the dividendwas $1.74.
2008 it went up a little bit.
2009 it went up, but then in2009, in 2010, they kept it the
(21:39):
same.
There was no increase in thedividend, there was no reduction
and there was no elimination ofthe dividend.
So that's okay, that's fine.
And then the dividend startedgoing up and since 2011 it's
been going up every year andcurrently it's sitting at $4.24,
which is a hundred and fortyfour percent increase since 2007
(22:00):
.
Now let's take a look at TD Banksame thing.
So we're not going to go overall the numbers.
You can see them up on thescreen here.
You can see that the bank alsoin 2009, 2010 did not.
They kept the dividend the same.
And Fast forward to 2024, youcan see that their dividend has
gone up 285 percent Since 2007.
(22:25):
So remember, every dividendincrease is more money in your
pocket.
So a 285 percent increase inyour dividend income is
incredible.
With CIBC, same thing From 2008to 2010.
They kept the dividend the same, but after that it kept going
up.
We can see a hundred thirty onepercent increase since 2007.
(22:48):
And finally, the Royal Bank ofCanada Did the exact same thing
as CIBC in 2008, 2009, 2010.
They kept the dividend the same, didn't change, and then you
can see that today the dividendis 203% higher than it was in
2007.
So you'll notice somethingthat's common to all five banks
(23:12):
and I've got it highlighted onthe screen for you right now In
2009 and 2010, all five bankshad not changed their dividend.
They kept it the same.
So that's coincidence.
I don't know, but I'm assumingthey were all under the same
financial pressure as all theother banks and they kept it the
(23:36):
same, and we can see that theincreases have been quite
substantial since 2007.
And then, when we go back to ourexample of CIBC we just looked
at earlier in this episode, youcan see that over time, with
dividend increases, in thebeginning the increases are very
(23:57):
small and then, over time, asyou reinvest those dividends
into other stocks that paydividends, you're going to make
even more dividend income, andthen it starts to have a
snowball effect of the dividendscompounding, and the longer you
stay invested, the more you'regoing to receive in dividend
income.
And so we saw with the exampleof CIBC.
(24:19):
Right, it was a $9,585investment has now returned over
$11,000 in dividends alone.
And as long as the dividendskeep coming in every year your
dividend income in this examplewould go up.
And if the company continues toincrease the dividends like
it's done for the last 12 years,then again your dividend income
(24:41):
would go up.
So what's important here is theconsistency and the reliability
of the dividend income that'scoming to you.
Share prices go up and down allthe time, so the value of your
portfolio may shrink or grow,depending on if we're in a
market downturn or the market isup, but we can't rely on the
(25:03):
share price alone, becausewithout the dividend then you're
only relying on the share price, and the share price alone may
not cover your living expenses,but the dividends can over time.
So what does this mean?
Should you?
Does this mean that you shouldgo out and buy any stock today
that's been paying a dividendfor a very long time and the
short answer is no.
(25:23):
There's a couple more things weneed to check right, and our
approach to investing is toinvest in quality, dividend
paying stocks when they'repriced low, so not just any
stock that's paying a dividend.
It has to be a quality stockand not just any quality stock.
It has to be priced low.
So how do you know, when you'relooking at a stock, if it's
(25:45):
priced low and how do you knowif it's a quality stock?
Well, for that I've createdwhat I call the 12 rules of
simply investing.
You can see them up on thescreen.
This is your checklist.
Before you invest in any stock,you want to make sure it passes
all of the 12 rules, not justsome of the rules.
All of the 12 rules.
Even if there's one failure,skip it, move on to something
(26:07):
else.
So you can see the 12 rules upon the screen here.
We're going to quickly just gothrough them all right now.
Rule number one Do youunderstand how the company is
making money?
If not, skip it, move on tosomething else.
Rule number two 20 years fromnow, will people still need its
product and services?
Rule number three does thecompany have a low-cost
competitive advantage?
Rule number four is the companyrecession proof?
(26:30):
Rule number five is itprofitable?
Rule number six does it growits dividend?
And that's what we looked at intoday's episode, and we saw
examples of five Canadian banksthe largest in Canada that have
been paying dividends for morethan a hundred years.
Rule number seven can thecompany afford to pay the
(26:51):
dividend?
Rule number eight is the debtless than 70%?
Rule number nine avoid anycompany with a recent dividend
cut.
Rule number ten does they buyback its own shares?
Rule number 11?
Is the stock priced low?
So there's three things that welook for there, where you look
at the PE ratio, we look at thecurrent dividend yield compared
to the 20 year average yield andwe look at the PB ratio.
(27:14):
If a stock meets all threeconditions, then we consider the
stock to be priced low and itpasses.
Rule number 11.
And then rule number 12 keepyour emotions out of investing.
So, for those of you that areinterested, I've created the
online simply investing course.
It's a self-paced course, it'sdivided into 10 modules and it
(27:36):
teaches you how to Become asuccessful dividend investor.
Now, module one we cover theinvesting basics.
Module two we cover the 12rules of simply investing in
detail with real-life examples.
Module three we apply the 12rules using a Google sheet.
Module four I show you how touse the simply investing
(27:57):
platform.
Module five Placing your firststock order step by step.
Module six building andtracking your portfolio.
Module seven when should yousell your stocks or should you
sell them at all?
So we cover that in moduleseven.
Module eight reducing your feesand risk, especially if you own
Mutual funds, index funds andETFs.
(28:19):
Module nine reduce Sorry.
Module nine is your action planto get started with investing
right away.
And module 10 I answer your mostfrequently asked questions and
we also have a platform thatwe've built.
It's a web app whichautomatically applies the rules
(28:39):
to over 6000 companies in the USand in Canada every single day,
so you can immediately seewhich companies are priced low,
which ones are priced high soyou can ignore those, and which
ones are quality Companies.
Do they?
Which are the rules they pass,which ones do they fail?
So, if anybody's interested inboth, if you're interested in
the course or the platform, I dohave a coupon code which will
(29:02):
save you 10% off of the courseand and the platform as well.
The coupon code is save 10, sa,ve 1-0, and it'll save you 10%
off of either the course or theplatform.
If you enjoyed today's episode,be sure to hit the subscribe
button.
We have a new episode out everyweek.
Hit the like button as well andfor more information, take a
(29:25):
look at our website,simplyinvestingcom.
Thanks for watching.
In this episode we'll look at the five largest
Canadian banks that have beenpaying dividends for over 100
years.
When it comes to dividendinvesting, consistency is key.
Hi, my name is Kanwal Sarai andwelcome to the Simply Investing
Dividend Podcast.
(00:21):
A quick special thanks to myfriend at dividendpowerorg for
inspiring me to make thisepisode today.
I'm going to put a link downbelow in the description to a
blog article that he recentlywrote about Canadian companies
that have been paying dividendsfor over 100 years.
So thanks again todividendpower.
(00:43):
Now let's get started with ourepisode Today.
I'm going to cover four topics,and the first topic is going to
be what are dividends?
So a quick review.
The next topic will look at howto make money with dividends,
with a real-life example usingone of the Canadian banks.
The third topic is going to belooking at the list of the five
(01:07):
Canadian banks that have beenpaying dividends for more than
100 years, and the fourth topicis to look at the importance of
consistent dividends as theycome in.
So let's get started with topicnumber one what are dividends?
So dividends are essentiallythe company sharing its profits
(01:30):
with you, the shareholder, andin this example, let's say, a
company is paying a dividend of$1 per share and you own a
thousand shares, you willreceive $1,000 every year for as
long as you own those sharesand as long as the company
continues to pay the dividend,regardless of the stock price.
Stock prices go up and down allthe time, but the dividends are
(01:53):
paid based on the number ofshares you own and the money is
deposited directly into yourtrading account as cash.
So you can spend that money ifyou wish.
You can spend those dividendsor you can reinvest them back
into other stocks that paydividends, and that's a great
way to compound your dividendgrowth.
(02:14):
So now let's move on to ournext topic then.
So how do you make money withdividends?
So there's two ways.
Number one, of course, iscollecting the dividend itself
and, like I said before, thedividend is going to be paid
based on the number of sharesyou own.
And then the second mostimportant thing here is the
(02:36):
dividend increases.
So every time a companyincreases its dividend, that's
more money in your pocket.
Now, looking at our example wejust looked at earlier, if a
company is paying a dividend of$1 per share and you own a
thousand shares, you'll get$1,000 every year for as long as
you own those shares, but ifthe company increases that
(02:57):
dividend to, let's say, $2 ashare, then you're going to
start earning $2,000 a year onthose dividends that you own.
So every time the dividend goesup, more money goes into your
pocket.
So now let's take a look at areal life example which
illustrates the power ofcollecting dividends over time
(03:20):
and having those dividendsincrease over time as well.
So we're going to look at aCanadian bank, cbc.
This is the fifth largest bankin Canada.
They were founded in 1867.
They have a little over 48,000employees and a market cap, as
of this recording, is a littleover $57 billion.
(03:43):
So let's take a look at thisexample.
Let's say in 2010, you had$9,585 to invest and let's say
you put that in CIBC shares andyou can see on the screen the
share price at the time was$31.95.
(04:03):
And let's say you purchased 300shares.
So we multiply the 300 sharesby the share price back in 2010.
And you can see that your totalinvestment at the time would
have been $9,585.
Now let's take a look at whatwould have happened to that
(04:24):
investment.
Would it have grown over timeor would it have gone down?
So now we're going to take alook at this example with CIBC.
So you can see on the screenthere's a lot of numbers here,
but I'm going to go through themstep by step and you can see
that back in 2010, the companywas paying a dividend of $1.74 a
(04:46):
share, and that's an annualdividend per share.
You can see that the followingyear the dividend went up.
The year after that it went upagain.
In fact, the dividend has goneup every single year for the
last 14 years consecutively andtoday, as of this recording, the
dividend is now $3.60 a share.
(05:09):
Now let's go back to 2010.
So you can see that the sharewas $1.74 and the stock price,
the purchase price, was $31.95 ashare.
So we're going to do somesimple math here.
We're going to take thedividend at the time divided by
the purchase price and we'regoing to express that as a
(05:30):
percentage, and you can see onthe screen that it is 5.45%.
So what does that really mean?
That's the dividend yield.
So that means that is yourreturn on investment while you
hold on to those shares.
And again, stock prices can goup and down all the time, but in
(05:50):
this example, your purchaseprice back in 2010 was $31.95.
So that's not going to change,and the dividend back then was
$1.74, so that's not going tochange either.
So the return on yourinvestment back then was 5.45%.
And what does that mean?
Well, we take 5.45% of yourinitial investment, which was
(06:15):
$9,585.
And if you do the math, you cansee that in the first year you
would have received $522 individends.
So that's essentially 5.4% ofyour initial investment, right?
So that's how much money youwould have gotten in dividends
back then.
Now you can see all the numbersfor the last 14 years, but
(06:37):
we're going to fast forward to2024.
So you can see the dividend hasnow gone up to $3.60.
We divide that by the purchaseprice and you can see that your
dividend yield based on yourpurchase price today is a little
over 11%.
And so today, in this year, youwould receive a little over
(06:58):
$1,000 in dividends.
So you can see, in 2010, youwere only making $522 a year in
dividends.
Now you would be making alittle over $1,000 in dividends
from the same investment.
Remember, you didn't buy moreshares, you didn't increase your
capital investment.
(07:18):
That stayed the same, and youstill own the same 300 shares in
this example.
Now, if we add up all thedividends received since 2010,.
Just from this investment alone, you can see that it is over
$11,300 in dividends.
So that's pretty remarkableBecause, keep in mind, your
(07:39):
initial investment was $9,585.
So, just from the dividendsalone, you have more than made
up covered your capitalinvestment.
So the risk now for thisinvestment in this example, for
you the risk would be zeroBecause you've already made your
money back and more.
(08:01):
I haven't checked the stockprice today.
I think recently it was tradingat $62 a share.
Do you really care if it dropsto maybe $58 tomorrow or $50
tomorrow?
Not really, Because, again, therisk to you in this example has
gone down to zero.
You've already received thedividends, have covered all of
(08:22):
your initial capital investment.
And so now we look at thisexample as of this recording
taking the share price today.
Of course, the shares have goneup in price as well, including
all the dividends earned since2010, you can see that your
initial investment of $9,585would be worth almost $30,000
(08:45):
today, so that's pretty good.
Even better is, 38% of that hascome from the dividends, so
that's huge.
That is a huge portion of thetotal return on your investment,
so that's pretty good.
We've also seen other studentswho have taken the Simply
Investing Course dividendinvestors who are making today
(09:08):
$5,000 a year in dividends.
Some of them are making $20,000.
Some are making $60,000 a yearin dividend income alone.
So the important thing here isthat it takes time for the
dividend growth to kick in,because you can see, year by
year, the increase isincremental, right?
The dividend goes up by acouple of pennies maybe 50 cents
(09:31):
, 20 cents.
That's not a huge increase, butover time those increases will
add up and as you collect thedividends, your dividend yield
will go up and, as we saw in theexample with CIBC, you would
now be earning double digitreturns every year just for
holding on to those shares.
Now I know some of you andrecently there's been some talk
(09:54):
in the news about some dividendreductions and elimination of
the dividend, where the companyhas stopped giving a dividend,
and this is an importantstatement.
So dividends are not guaranteed.
Companies are under no legalobligation to pay you a dividend
, so they can reduce thedividend any time they want or
(10:15):
they can eliminate it altogetherany time they want, and we saw
that during COVID in March of2020, when companies like Boeing
, disney, general Motorscompletely eliminated the
dividend.
So if dividends are notguaranteed, then how do you have
any confidence in investing individend stocks?
(10:37):
So the important thing here isthat we wanna look at a
company's track record.
How long have they been payingthe dividend?
Have they been increasing thedividend?
Has it been five years, 10years, 20, 30, 40, 50 years?
How long has it been?
Because the better the trackrecord, the more confidence we
(10:58):
can have in the future that thecompany will continue to pay the
dividend.
So that brings us to the thirdtopic in our episode today,
which is we're now gonna look atthe five largest banks in
Canada that have been payingdividends for more than a
hundred years.
So that is an impressive trackrecord.
(11:20):
So let's get started.
We're gonna start with thefirst company on our list, which
is Bank of Montreal.
This is a large bank.
All of these banks operate inthe United States as well, and
in other countries as well,outside of Canada.
We're gonna start with Bank ofMontreal because they have been
paying the dividend for thelongest time, since 1829.
(11:43):
The second longest is Bank ofNova Scotia 1833.
Then we go to the TorontoDominion Bank.
The TD Bank has been paying adividend since 1856.
And then our CIBC Bank that wewere looking at has been paying
a dividend since 1868.
And finally, the Royal Bank ofCanada has been paying a
(12:07):
dividend since 1870.
So this is an impressive trackrecord.
Let's take a look at each ofthese banks one by one, so we're
gonna go in the same order withthe company that started paying
the dividend first and thenwork our way down.
So the first company on ourlist is Bank of Montreal,
(12:29):
founded in 1817, has over 55,000employees, a market cap, as of
this recording, of about $93billion, and it is the third
largest bank in Canada by marketcap.
Bank of Montreal has beenpaying a dividend for 195 years.
(12:49):
So I'm gonna say that again,because this is important they
have been paying a dividend for195 years and they started in
1829.
So that is an impressive trackrecord and one that's important
to us as dividend investors,because we rely on the dividends
(13:10):
to provide us with a source ofinvestment income.
Let's move on to our next bank,which is Scotia Bank.
They are the fourth largestbank in Canada by market cap.
The bank was founded in 1832.
They have a little over 89,000employees, market cap is over
$76 billion and they've beenpaying a dividend for 191 years,
(13:36):
since 1833.
Let's move on to TD Bank, thesecond largest bank in Canada by
market cap, founded in 1855.
They have a little over 103,000employees, a market cap of over
$149 billion and they've beenpaying a dividend for 168 years,
since 1856.
(13:59):
And let's move on to CIBC,which we covered a little
earlier in this episode is thefifth largest bank in Canada by
market cap, founded in 1867,over 48,000 employees, market
cap of $57 billion, and they'vebeen paying a dividend for 156
(14:19):
years, since 1868.
Think about how many marketrecessions, how many market
crashes we've had in the last100 years.
Think about even recently withCOVID, march of 2020, when the
market tanked with 2008,.
2009 financial crisis.
The market tanked In 1911, theNew York Stock Exchange was
(14:42):
closed for a number of days andthe markets tanked.
So history is full of instancesin events in the world that
have caused stock markets todecline, but yet companies like
these have been paying dividendsfor almost well.
(15:03):
If we look at Bank of Montreal,almost 200 years of paying
dividends.
So that's an incredible trackrecord.
Let's get on to our last bankon the list here, which is the
Royal Bank of Canada, rbc.
They are the largest bank inCanada by market cap.
Their market cap is a littleover 186 billion dollars.
(15:23):
They were founded in 1864.
They have over 91,000 employeesand they've been paying a
dividend for 154 years, since1870.
So there you have it.
You can see on the screen.
We've got all the five bankslisted.
Bank of Montreal is on its wayto all over almost 200 years of
(15:48):
dividends, right there at 195.
So let's wait a couple moreyears and they'll be.
If they continue to pay thedividend, they'll surpass the
200 year mark.
Bank of Nova Scotia is insecond place at 191 years of
dividend increases.
So that is again an impressivetrack record.
(16:10):
What's important here toremember is the consistency of
the dividend, because it makesit more reliable.
Right, and that's our lasttopic in today's episode, is
consistency, and what does thatgive us?
What does that provide us?
It provides us with confidenceas dividend investors when we
(16:30):
look at that.
It gives us confidence thatthese companies will continue to
pay dividends to us in thefuture and hopefully increase
them.
I'm going to give you a realquick example to illustrate the
importance of consistency.
So if we were looking at twocompanies to invest in, company
A and company B, you can see upon the screen.
(16:50):
We're going to keep thisexample, real simple Stock price
is the same, the dividend isthe same, payout ratio is the
same, the debt is the same, soeverything else is the same.
Let's assume they're in thesame industry, in the same
sector.
So, all things considered equal, which company would you invest
in?
Company A or company B?
Now, there's one differenceCompany A has been paying a
(17:14):
dividend since 1874.
So 150 years of payingdividends.
Company B just started paying adividend three years ago, in
2021.
So which company are you goingto invest your hard-earned money
in?
Assuming all things considered,equal, right?
So company A is going to beprobably a safer option to
(17:36):
invest in Because they've beenpaying a dividend for 150 years.
We don't know what's going tohappen with company B next year.
Are they going to still pay thedividend?
Are they going to reduce it?
Are they going to eliminate italtogether?
Will they pay us a dividend forthe next 5, 10, 15, 20, 30
years?
We don't know, but company Agives us the confidence that
(17:58):
they will continue to pay thedividend.
Let's take a look at a veryspecific example.
I want to take you through aspecific example in 2008, the
financial crisis, because nowwe're going to take a look at
the five Canadian banks and seehow well or how poorly they
performed back in 2008.
(18:19):
For those of you old enough toremember, 2008 was not a good
time for banks.
We had a number of banks in theUS go bankrupt, completely gone
.
Washington Mutual is one of themost famous examples, and the
bank just went bankrupt InCanada.
The five banks were kind of ina similar situation Not bankrupt
(18:42):
, but not doing well.
Here's a graph up on the screenthe stock price chart for a
Royal Bank of Canada.
So this is the largest bank inCanada and you can see that in
2007, the stock was trading at$60 a share and then, by the
time we get to 2009, it's halfthat price.
It's trading at $29.
(19:03):
So if you were just looking atthe stock price, this would be
terrible and we're not going toshow it here in this episode.
But you can look at the otherfour banks the Canadian banks
that we talked about today, andtheir stock price graph looks
identical.
They all went down.
2008 was not a good time forbanks and all those prices came
(19:27):
down.
So let's take a look now at thedividend, because, as dividend
investors, that's our focus.
Our priority is the dividend,not the stock price.
So now let's take a look at howthe dividend did during one of
the worst periods in history forbanks.
So we're going to start withBank of Montreal.
(19:48):
Okay, we're going the sameorder with the five banks that
we just looked at.
So we're going to start withBank of Montreal, and you can
see up on the screen in 2007,the dividend was $2.71.
In 2008, they increased thedividend, but then in 2008 was
when all of the financial crisis, the problems started.
(20:08):
So what the bank did is theydidn't Cut the dividend, which
is good for us as dividendinvestors, and they didn't
reduce the dividend, which isalso not good for dividend
investors.
So there was no reduction andthere was no elimination of the
dividend.
They just kept it the same.
So you can see, in 2009, thedividend didn't change.
In 2010, the dividend didn'tchange.
(20:30):
In 2011, the dividend didn'tchange.
Now most people would think,well, I'm going to sell the
stock, the dividends goingnowhere, right, and in hindsight
, that would have been the wrongapproach.
If you just held on and Stuckwith it, you could see that in
2012, the dividend went up notby much, it's only a two cents
(20:55):
but then into 2013, the dividendwent up again, and then it went
up again and then, ever since2012, the dividend has gone up
every single year, consecutivelyfor 12 years, and now we fast
forward to 2024.
As of this recording, you cansee that the dividend is $6.04.
So that is pretty impressive.
(21:17):
It is a hundred twenty threepercent increase since 2007.
Now let's take a look at Bank ofNova Scotia.
You'll see a similar trend.
You'll see in 2007 the dividendwas $1.74.
2008 it went up a little bit.
2009 it went up, but then in2009, in 2010, they kept it the
(21:39):
same.
There was no increase in thedividend, there was no reduction
and there was no elimination ofthe dividend.
So that's okay, that's fine.
And then the dividend startedgoing up and since 2011 it's
been going up every year andcurrently it's sitting at $4.24,
which is a hundred and fortyfour percent increase since 2007
(22:00):
.
Now let's take a look at TD Banksame thing.
So we're not going to go overall the numbers.
You can see them up on thescreen here.
You can see that the bank alsoin 2009, 2010 did not.
They kept the dividend the same.
And Fast forward to 2024, youcan see that their dividend has
gone up 285 percent Since 2007.
(22:25):
So remember, every dividendincrease is more money in your
pocket.
So a 285 percent increase inyour dividend income is
incredible.
With CIBC, same thing From 2008to 2010.
They kept the dividend the same, but after that it kept going
up.
We can see a hundred thirty onepercent increase since 2007.
(22:48):
And finally, the Royal Bank ofCanada Did the exact same thing
as CIBC in 2008, 2009, 2010.
They kept the dividend the same, didn't change, and then you
can see that today the dividendis 203% higher than it was in
2007.
So you'll notice somethingthat's common to all five banks
(23:12):
and I've got it highlighted onthe screen for you right now In
2009 and 2010, all five bankshad not changed their dividend.
They kept it the same.
So that's coincidence.
I don't know, but I'm assumingthey were all under the same
financial pressure as all theother banks and they kept it the
(23:36):
same, and we can see that theincreases have been quite
substantial since 2007.
And then, when we go back to ourexample of CIBC we just looked
at earlier in this episode, youcan see that over time, with
dividend increases, in thebeginning the increases are very
(23:57):
small and then, over time, asyou reinvest those dividends
into other stocks that paydividends, you're going to make
even more dividend income, andthen it starts to have a
snowball effect of the dividendscompounding, and the longer you
stay invested, the more you'regoing to receive in dividend
income.
And so we saw with the exampleof CIBC.
(24:19):
Right, it was a $9,585investment has now returned over
$11,000 in dividends alone.
And as long as the dividendskeep coming in every year your
dividend income in this examplewould go up.
And if the company continues toincrease the dividends like
it's done for the last 12 years,then again your dividend income
(24:41):
would go up.
So what's important here is theconsistency and the reliability
of the dividend income that'scoming to you.
Share prices go up and down allthe time, so the value of your
portfolio may shrink or grow,depending on if we're in a
market downturn or the market isup, but we can't rely on the
(25:03):
share price alone, becausewithout the dividend then you're
only relying on the share price, and the share price alone may
not cover your living expenses,but the dividends can over time.
So what does this mean?
Should you?
Does this mean that you shouldgo out and buy any stock today
that's been paying a dividendfor a very long time and the
short answer is no.
(25:23):
There's a couple more things weneed to check right, and our
approach to investing is toinvest in quality, dividend
paying stocks when they'repriced low, so not just any
stock that's paying a dividend.
It has to be a quality stockand not just any quality stock.
It has to be priced low.
So how do you know, when you'relooking at a stock, if it's
(25:45):
priced low and how do you knowif it's a quality stock?
Well, for that I've createdwhat I call the 12 rules of
simply investing.
You can see them up on thescreen.
This is your checklist.
Before you invest in any stock,you want to make sure it passes
all of the 12 rules, not justsome of the rules.
All of the 12 rules.
Even if there's one failure,skip it, move on to something
(26:07):
else.
So you can see the 12 rules upon the screen here.
We're going to quickly just gothrough them all right now.
Rule number one Do youunderstand how the company is
making money?
If not, skip it, move on tosomething else.
Rule number two 20 years fromnow, will people still need its
product and services?
Rule number three does thecompany have a low-cost
competitive advantage?
Rule number four is the companyrecession proof?
(26:30):
Rule number five is itprofitable?
Rule number six does it growits dividend?
And that's what we looked at intoday's episode, and we saw
examples of five Canadian banksthe largest in Canada that have
been paying dividends for morethan a hundred years.
Rule number seven can thecompany afford to pay the
(26:51):
dividend?
Rule number eight is the debtless than 70%?
Rule number nine avoid anycompany with a recent dividend
cut.
Rule number ten does they buyback its own shares?
Rule number 11?
Is the stock priced low?
So there's three things that welook for there, where you look
at the PE ratio, we look at thecurrent dividend yield compared
to the 20 year average yield andwe look at the PB ratio.
(27:14):
If a stock meets all threeconditions, then we consider the
stock to be priced low and itpasses.
Rule number 11.
And then rule number 12 keepyour emotions out of investing.
So, for those of you that areinterested, I've created the
online simply investing course.
It's a self-paced course, it'sdivided into 10 modules and it
(27:36):
teaches you how to Become asuccessful dividend investor.
Now, module one we cover theinvesting basics.
Module two we cover the 12rules of simply investing in
detail with real-life examples.
Module three we apply the 12rules using a Google sheet.
Module four I show you how touse the simply investing
(27:57):
platform.
Module five Placing your firststock order step by step.
Module six building andtracking your portfolio.
Module seven when should yousell your stocks or should you
sell them at all?
So we cover that in moduleseven.
Module eight reducing your feesand risk, especially if you own
Mutual funds, index funds andETFs.
(28:19):
Module nine reduce Sorry.
Module nine is your action planto get started with investing
right away.
And module 10 I answer your mostfrequently asked questions and
we also have a platform thatwe've built.
It's a web app whichautomatically applies the rules
(28:39):
to over 6000 companies in the USand in Canada every single day,
so you can immediately seewhich companies are priced low,
which ones are priced high soyou can ignore those, and which
ones are quality Companies.
Do they?
Which are the rules they pass,which ones do they fail?
So, if anybody's interested inboth, if you're interested in
the course or the platform, I dohave a coupon code which will
(29:02):
save you 10% off of the courseand and the platform as well.
The coupon code is save 10, sa,ve 1-0, and it'll save you 10%
off of either the course or theplatform.
If you enjoyed today's episode,be sure to hit the subscribe
button.
We have a new episode out everyweek.
Hit the like button as well andfor more information, take a
(29:25):
look at our website,simplyinvestingcom.
Thanks for watching.
Popular Podcasts
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations.
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
The Nikki Glaser Podcast
Every week comedian and infamous roaster Nikki Glaser provides a fun, fast-paced, and brutally honest look into current pop-culture and her own personal life.