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.