Dividend Stocks - TXF

There is another way to measure successful stocks.

By their dividends.

Profitable companies which have already plateaued in terms of their ability to expand (ignore tech stocks, tech stocks are always looking for ways to expand and would rather have excess cash for acquisitions almost never pay dividends) have to do something with all that extra money they are making. So if they cannot expand, and they cannot acquire other companies in the same field, one way for them to attract investors is paying out good dividends.

So how are dividends calculated???

Annual net income minus net change in retained earnings = dividends paid.

Basically it is output as a percentage.

And any percentage about 2% (or above whatever other institutions are giving as interest on bonds) is generally a good company to be putting your money into because of the value of the dividends being paid out.

Thus a company (or an ETF in the example below) that is providing a very large dividend while growing consistently over a 5 year period is a very solid investment which pays you money over time, in addition to growing in value.

I am speaking, of course, about the TXF, which is an ETF that invests in 25 of North America's largest tech companies and currently pays a whopping dividend yield of 10.02%.

So if you own $1000 worth of TXF stock you will be making roughly $100.20 per year in dividends, in addition to it going up in value.

And whenever it goes up in value and pays dividends you are basically making money hand over fist. Which is apparently a nautical term for pulling a rope on a ship, I learned recently. I thought it was a case of you are holding coins in your fist, so many coins that you have to put your hand over the top to prevent yourself from dropping some of them... But apparently that is not the case. It is just a nautical term.

Anyway, back on topic.

TXF took a hit back in March 2020 during the start of the pandemic and then quickly recovered. It has been a solid earner during the past 5 years.

And if you look back further in history to October 2011 then you see it has more than doubled in value during a 10 year period.

I have other reasons why I like it too (asides from that nice growth curve).

Take a look at the stats block below...

A yield of 10.02% is amazing.

Compare that to other stocks like Tim Hortons (THI has a 0% yield) or Canadian Tire (CTC has a 2.56% yield) or Royal Bank of Canada (RBC has a 3.41% yield) and you have to wonder why would you ever invest in a restaurant, a hardware/department store, or even Canada's largest bank.

True, 3.41% yield isn't bad... but it isn't spectacular either.

RBC stock has gone up in value 55.93% in the past 5 years, so it is only marginally worse than TXF, but it is getting only roughly one third of the dividends that TXF offers.

With stocks that pay really good dividends they end up paying for themselves over time, but the length of time could be dramatically different depending upon the stock.

With RBC stock it would take about 29 years to pay off the initial investment.

With TXF stock it would take about 9-10 years to pay off the initial investment.

Stocks that pay 10% or more in dividends are very hard to find. Heck, stocks that pay dividends in the 5% to 9% range are also very hard to find.

If you can think of another stock or ETF that pays 10% or more, while still recording a 5 year valuation growth rate above 60%, please leave a comment below. I would love to hear about it.

Plus TXF invests in the biggest tech stocks in North America... and tech is the future. Like investing in robotics and microchips, investing in tech is a very safe bet.

Canadian Dollar Hedged ETFs

I like these...

Canadian Dollar Hedged ETFs.

These allow me to invest in the US stock market without having to worry about the exchange rate. Plus hedged ETFs on average earn about 0.5% more than unhedged ETFs.

Currency hedging reduces the effect of exchange rate fluctuations on international investments, making it very useful for Canadians to invest in American stocks and/or bonds.

Let's pretend you want to invest $1000 in American stocks, but the Canadian-American dollar exchange rate changes over time. So if your stocks go up by 20%, but the Canadian dollar goes up in value by 20%, how much money have you made when you measure it in Canadian dollars?

Well $1000 CDN of unhedged stocks... x 1.2, but then x 0.8... = $960.

 But if you buy $1000 CDN worth of hedged stocks then the math works like this: $1000 x 1.2 = $1200.

See the huge difference?

Now often it won't be as dramatic as that. I am using an extreme example in which the Canadian dollar goes up in value by 20%... which is known to happen usually about once per decade whenever oil prices skyrocket and the Canadian dollar ends up going up thanks to the value of oil.

Choosing an unhedged ETF can allow you to gain from beneficial currency changes, but you also carry the risk of the negative effects of currency price changes.

So there are pros and cons to using unhedged stocks, but for me it isn't worth it. I would rather hedge my bets and then not have to worry about it.

After all a war could break out in the Middle East literally at any time and the Canadian dollar could go up 20 to 30% because of it. Seriously, do some research. The Canadian dollar and the price of oil always goes up whenever there is a war in the Middle East.

And do you really want the value of your investments to be dictated by whether there is currently a war happening in Iraq, Iran, Saudi Arabia, etc??? It isn't worth the risk.

Plus unhedged stocks usually end up being worth more anyway. So you might as well buy the hedged version.

Gold, Silver, Copper and Nickel Stocks Worth Researching

AYA is a gold and silver mining company in Canada.

CMMC deals mostly with copper, as the name "Copper Mountain Mining Corporation" implies.

CNC (Canadian Nickel Company Inc) deals with nickel, obviously.

Now what I want you to look at is the nice upward curves these stocks have. AYA and CMMC have sharper curves, but I fully expect these stocks to go up in value as demand for gold, silver and copper continue to rise thanks to the electronics industry.

The price of nickel meanwhile has been steadily rising since 2016 and is expected to continue to become a hot commodity into the 2030s.

CNC is one of the biggest nickel producers in the world, and if you want to research more about their company I recommend visiting their website:

canadanickel.com/investor/news-releases/

The point I am trying to make is that these are Canadian companies which are performing very well, and I believe they will continue to perform well during the next 20-30 years as demand for their precious metals continues to grow.

And demand means more profits, which means their stocks keep going up. Right now their stocks are quite affordable too. $3 to $10 per share is very reasonable.

I bought AYA back in July when it was less than $9 per share, and now it is close to $10.

CMMC and CNC haven't moved much since I purchased them, but I am confident they will go up gradually over the long term. I look forward to checking in on these stocks in July 2022 and seeing how well they've been doing since the time I purchased them. Or 5 years from now. Or 10 years.