Investing Yourself

(mostly revised September 2006)
FAQ #8 added December 2006) paragraph 4 revised July 2007

1. You can invest yourself. In fact, you must learn to invest yourself. Here's one mighty powerful reason: if you had bought Bank of Nova Scotia common shares in 1990, you would have earned a total return of 31.6% per year up to the end of 2005. Of this, 14.2% was dividend yield on the original investment and 17.5% in capital appreciation. Thirty two percent a year.
   
   The average broker has some 300 clients. How much attention will you get if you deal with a broker? And the broker is in business, realize, to sell the securities his firm wants him or her to sell. These are most likely not good dividend growth stocks.
   It's your money. You alone are motivated to manage it best.
   At the most, you are only going to buy a dozen common stocks with growing dividend in your lifetime. And you'll hold them for the rest of your life (The Investment Zoo page 104, 94). In a way, it's quite simple.
   You are going to save a lot of money. By not being in mutual funds with a 2.5% annual fee, you'll save $625 a year for each $25,000 you have invested. These fees add up. For instance, if your portfolio is $100,000 and earning 10%, and using an annual fee of 3% (wrap accounts fees are in this range), over a period of 25 years you would save over half a million dollars by investing yourself: yes that's $540,730 (3 x 15,885 x 10 The $15,885 comes from this Scudder mutual fund add in 1996: “In 25 years, a one-time $10,000 investment earning 10% per annum would be worth $15,885 more just because of a 1% saving in MER.”). Source: Connolly Report December 1996 page 376 under the title of Gold, Frankincense and MER.
2. First: open an account with a discount broker at one of the major banks. Why a major bank? You are going to be giving them your money. You want to be sure your get it back and that they keep your stock 'certificates' safely. You may save a few dollars a trade with outfits like E-Trade or Ameritrade, but I don't think it's worth it. You are not going to be trading that much in any case. You'll be paying around $29 a trade with a bank discount broker versus over $100 or so if you dealt with a full-charge broker…and you just can't do that. “Anybody who listens to their broker, to my mind, is doomed to make less money than the averages, by and large.” Stephen Jarislowsky “Don't mistake brokers for your friends.” Charles Ellis
3. It's easy…really.
   You are only going to be dealing with a few stocks (the ones Jarislowsky calls “premium high compound growth non-cyclicals on page 104 of his Investment Zoo) and, at the most, you will make only a couple of trades a year. At any point in time, I am only thinking of one or two stocks. Begin slowly and buy your good solid, dividend-paying stocks over a number of years…when you figure they are value priced. I use yield charts to determine value (and Graham's number…more on that later). (Doing research on dividends)
   Here's more motivation to switch to dividend growing stocks. We bought our Fortis common stock in 1995 for $6.15 a share (adjusted for a 4:1 stock split in 2005). As I key this, the dividend paid, each year, by Fortis (an electrical utility based in St John's) is 64 cents a share. Our yield on Fortis is now 10.4% (.64 / $6.15). Last year Fortis' dividend increased by 12.3%. And, our shares are now worth $24 each…a quadruple in price…but it took a decade. Do you have the patience to wait? If so, your retirement income will be enhanced and you can spend some of the growing capital too. We could replace our 1998 'three series' with our 2000 Fortis shares now. And we originally just bought 500 shares of FTS. I love stock splits (Check to be sure there was a stock split in the last decade for any common stock you are thinking of buying. Then you know you are considering a high growth stock). Instead of a new 'three series', however, we plan to send more money to Medicine sans Frontiers. Fortis is expensive to buy now (Dec 2006), though. Its current yield is more than one percent below its average yield. Keep track of yields: they tell stories.
   If you don't have an account at a discount brokers yet, you could begin buying common stock by asking a friend to purchase on your behalf 100 or 200 shares of your choice common stock through his or her account. After its bought, for $40 or so, the stock can be registered in your name and given to you in the form of an official stock certificate. When you eventually open your account at a discount broker, you can deposit the certificate into that account without charge. Then it can be kept there as a street certificate, or some, or all, of the shares can be sold.
   It's much easier to select a few stocks from the about 60 that raise their dividends every year than it is to choose a mutual fund from among thousands. As I mention below, there are only about 15 Canadian stocks you should be considering/will be following for the rest of your life…the great consistent dividend growers.
   If you are just starting an investment portfolio, you must buy Stephen Jarislowsky's The Investment Zoo. Even if you do not like investment books, there are twenty pages in this book which are 'must read'. You'll not find better advice anywhere. And it's Canadian too. Start with pages 45, 46 and 47. Here Jarislowsky talks about bonds versus stocks, the problems of living on fixed income and which stocks to buy. It's really great advice based on fifty years of investment experience. Don't let yourself be “corralled by slick mutual fund salespeople” Jarislowsy says in the forward to The Investment Zoo.
4. Your basic portfolio might start with a life insurance company ( Great West, Sun or Manulife…select the one with the 'middle' yield); a pipeline (TransCanada Corp or Enbridge); a couple of the major banks; one stock from the Power Corporation group of companies; maybe an electrical utility with good dividend growth, although as I check this in July of 2007, the electricals are very expensive (Atco, Canadian Utilities, Fortis, Emera [poor dividend growth] or TransAlta [TA has no dividend growth in last decade]). Buy dividend-paying common stocks for their dividend growth and hold them for years and years…decades even. After a decade or so, with dividend growth, you could end up beating the market with just dividend returns ( Building Wealth with Dividend Stocks by Joseph Tigue, page 66.)
   In Building Wealth with Dividend Growth, Tigue offer this advice in the opening paragraph of Chapter 3: “The uninitiated investor seeking income from stocks often will start and end the search by looking for the highest yielding issues. That is the worst way to come up with a list of candidates.” My advice, having followed these stocks since the early 1980s: go for moderate yield and consistant dividend growth.
   These dividend-paying stocks are not very volatile…they vary in price by only a few dollars a year. Also, these companies produce good cash flow from a needed product. They will still be in business years from now. My general rule for stock selection is this: buy the common stock with a consistant dividend growth record, a higher yield and a recent dividend increase…say an increase in the last year as a general guide. A dividend increase means the comapny is doing well.
5. As I see it, there are three kinds of dividend-paying common stocks.
   • High yield - no recent dividend increase or a small dividend increase. Examples: Transalta and Emera. Generally, I avoid stocks which have not had a recent dividend increase and common stocks with a poor dividend growth record.
   • Moderate yield - with medium dividend increases. Example: TransCanada
   • Lower yield - with higher dividend increases - lots of examples, Sun Life in October 2006, for instance. Power Corp in July 2007.
   A dividend increase, remember, is a positive sign the company is in good shape. I would eliminate Emera because EMA's dividend increase record is only 1.2% over the last five years. I'd consider Emera, though, in spit of this, if it was priced under $16 or so. One the other hand, if you buy a premium dividend grower with a good starting yield and dividend growth, you'll be a winner following this strategy. Start today. Have faith. Make the leap from GICs, bonds or funds.
6. FINANCIAL NEWS: You do not have to watch the financial news or follow your stock prices daily. I don't. In fact, it is better if you do not.* The level of competency is very low: few writers/broadcasters know what they are talking about and their guests do not know the future either. If you watch/read them, you could be tempted away from the good, safe dividend-paying blue chips that will guarantee a comfortable retirement to the mass delusion that some growth stock is a sure way to become a millionaire. Learn to control your behaviour early, or it will cost you dearly. Quick test: If you regularly miss the discount for not paying your utility bill on time, I'd bet you don't succeed at the investment game. That video rental shops make more money on late fines than rentals is telling: people can't control their behaviour. If you can't/don't control your behaviour, you might as well resign yourself to being fleeced by the purveyors of mutual funds.
   *About watching stock prices daily, Warren Buffet has this to say:“Following Benjamin Graham's teachings, Charlie [Munger] and I let our marketable equities [stocks] tell us by their operating results-not by their daily, or even yearly, price quotations-whether our investments are successful.” In his July 7 2005 letter, Richard Russell said this: “It's rare when analysts and newspaper reporters can come up with the real reason for the stocks market's movements.” I just don't watch, listen to, or read the daily stock market data. It's mostly gibberish. “Ignore the weekly wiggles in prices” David Dreman said in Forbes magazine of September 4 2006. Rather, “Think of long term risks and long-term rewards”
   Follow the companies you own and are interested in buying…that's it: ignore the rest. If the dividends are increasing, chances are your investment is in good shape. Dividends increases are the easy quick test of a company's strength. I chart my yields weekly using data from the Saturday Report on Business and key the yield into a spreadsheet. Monday's Financial Post has the weekly dividend data. It's now in much bigger print (Their annual FPdividend record covers three years and costs about $100. The TSE Review lists dividend increases each month too.) Buy a copy next Monday and see what it's like.
7. Study this sentence.
   “Treasurys [bonds] are no more inherently safe than stocks are inherently value-laden. Safety and value are qualities conferred not by the nature of an asset but by the price at which it is acquired” (James Grant, Forbes Oct 28 2002. Read anything Grant writes.)
   Most stocks aren't, but the kind of stocks I follow, I would argue, are as safe as bonds when purchased at a value price. Bonds fluctuate in price too: you just don't hear about it on the daily news. Hence, people think bonds are safe.
8. Realize why you are in the stock market. It's for the same reason people buy bonds: for the income. But we are buying a growing income from common stocks, not a static income from interest. And here's the bonus: as your dividends grow, so will your capital. We are not playing the market. We are trying to buy a safe stock and plan to hold it for many, many years.
   More motivation to switch: I bought the TransCanada shares I still own in 2000 for $10 a share. The dividend is now$1.28 so my yield is 12.8% (1.28 / 10). Do you get 13% on any investments you bought just six years ago? And 12.8% is just the yield. TransCanada's shares are selling for over $35 a share. My capital has tripled too. I took a bit of a chance, though. Back in 2000, TransCanada had just reduced its dividend from $1.12, as I remember, down to 80 cents. Investors were not happy and TRP's stock price fell. In 2006, Loblaw's stock price fell some $25 and there was no dividend increase. I bought L. We'll see how Loblaw works out a decade from now. Right now, L is below the price I purchased it for. It happens.
   “Market values are fixed only in part by balance sheets and income statements; much more by the hopes and fears of humanity; by greed, ambition, acts of God, invention, financial stress and strain, weather, discovery, fashion and numberless other causes impossible to be listed without omission.” Gerald Loeb, The Battle for Investment Survival)
9. Your biggest concern will be that the price of the common stock you buy might decline right after you buy it. It well might. (For instance, few months after I bought Loblaw (L ticker symbol, and there's no 's') at $57.60 and $54.75, Loblaw's price, in August and September of 2006, dropped to just below $50.) Don't let this worry you in the least. (I'll add more to this topic later. It's important. Refer to FAQ #3 below for now)
   • The dividend-paying stocks we follow are not volatile. They fluctuate in price, but not by much. They are solid companies with recurring earnings which have paid dividends for years.
   • It you bought a stock near the top of a list sorted by yield (the Report on Business has one every Saturday..not the top ones, though, see below under High Yield) and checked before purchasing thatthe stock had a recent dividend increase, you most likely obtained it at a value price. It won't decline much…that's already occurred. (Eg: Sun Life just above $42 in July 2006).
   • The longer you own a common stock with a growing dividend, the safer it becomes. As the dividend grows, the floor price supporting the price does too. Within a couple of years, with the growing dividend, the price rarely reverts below your purchase price.
   • The dividend will support the price.
   • Over two decades I've been following the strategy, I've only had a couple of bad stocks, and only one where the loss was substantial: Royal Trust in 1993. There was a warning before hand: I failed to heed the warning and was burnt. Royal Trust's yield got way too high…more than a percentage point abouve the next one in the list.
   • When you select a common stock with a growing dividend, as the dividend grows the price of the stock grows too. Think about it. It has to. This is the main reward of the dividend growth strategy: you get both a growing income and capital appreciation.
   (Want more detail on this point? Go to a book store, find S&P's Guide to Creating Wealth with Dividend Stocks by Joseph Tigue. Stand there and read page 66 and page 110. If you have time, sit down and read all of Chapter 5.)
   • If you are concerned about the safety of dividend-paying stocks when the stock market, as a whole, 'crashes', this sentence from Donald Coxe's June 2004 Basic Points, should ease your concerns. Most good dividend-paying stocks actually rose as the market as a whole crashed in 2004. “An investor who owned a portfolio of high-quality stocks that had records of more than 10 years of dividend payments growing faster than inflation would barely have noticed the bear market and would have outperformed most market indices since March 2000, let alone outperforming Nasdaq.”
   
   What it all boils down to is this: TCR p 364 June 1996
   Do you want a fixed income and a guarantee of your deflated capital from a GIC or bond, or
   Do you want to enjoy a growing income from appreciating common shares?
   It's a big leap, it will take courage, but boy is it worth it. Try just a hundred shares for a start. Be brave. These are good solid common stocks that have been and will be around for years. It's the growing income you are after: never mind the price after you've bought. Once you see how it works, you'll not want to sell in any case. And most likely you'll wish you started earlier and bought 200 shares and not just 100 shares. And there's little maintenance and no annual fees as with mutual funds.
10. High Yield - be cautious (This item, from the Wall Street Journal in May 2004, is wise counsel.)
    “But before you start stuffing your portfolio with high-yielding [common] stocks, understand that high yield isn't, in itself, the road to paradise. High yields alone tell us little about a company's balance sheet or its ability to generate cash flow, both of which are key measures of the viability of that dividend payment going forward.
    Just as important as a company's dividend yield is knowing its so called payout ratio, or what percentage of net income is being paid out in dividends. The lower that ratio, the less likely that the dividend will be cut. Any company with a payout ratio much higher than the market average, might be a yellow flag.”
    (As I write this in June of 2004, TransAlta's yield is more than 500 basis points (half a percent) more than yield of the next highest yield in the list of dividend-paying stocks. I would not buy it for that reason alone (TA). Instead, opt for the common stock with a higher yield and a good record of dividend growth. Recent dividend growth is a positive signal the company is doing well. Emera (kind of nova Scotia power) has a higher yield but the dividend growth is not too good. BCE's yield is higher too and the dividend is solid, but there was no dividend growth in the decade before 2005. BCE increased its dividend by 10% in April 2005. Look for a good combination of higher yield and good dividend growth.
    Jonathan Clements writing in the Wall Street Journal on June 13, 2004 made some interesting points regarding investing on your own. Whenever Clements suggests investing on your own in his column “a raft of brokers and financial planners fill my in box with angry e-mails”. Clements admits that people who panic when the market goes down or chase hot investments have no business investing on their own. “Nothing I write could help them”, Clements says. “But I have also met heaps of investors who have fared just fine on their own. If fact, I honestly believe more people should go this route.”
    The New York Times November 14 2004 issue:
    “INVESTORS who shun stocks that dole out seemingly trivial dividends of 1 or 2 percent may want to take a second look. For more than two decades, dividend payers, often pokey but stable enterprises, have generally done a better job than other companies when it comes to enriching their shareholders. This year is no different. Through Thursday [Nov 11], the dividend-paying stocks in the Standard & Poor's 500-stock index posted a total return of 13.8 percent, according to S.& P., versus a gain of 3.8 percent for the nonpayers - often flashier, high-tech companies that aim for huge growth. Indeed, since 1980, a period that embraces the longest bull market in history, dividend payers have outperformed nonpayers by almost three percentage points a year, on average, according to Howard Silverblatt, a market equity analyst at S.& P. ”
11. PROBLEMS - In trying to initiate this strategy, you could have two problems:
    1. You will not believe it will work. These are dull stocks. 'Story' stocks/hot investments will tempt you from the straight and narrow. You'll lose with growth stocks, most likely, and it will cost you a few years' time and thousands of dollars, but you'll return to the fold when you see how well your tried and true stocks have done with dependable dividend growth.
    2. You will not have the patience to wait for the dividend growth to take place. “Infantile wishes for sweets and instant gratification don't go away just because you have lived a certain number of years and have money to invest in corporate stock.” Lowell Miller in The Single Best Investment p38 Dividend growth investing is not a get-rick-quickly scheme. It's a slow methodical way to build wealth over time. After a few years you will realize what is happening and eschew all other forms of investment.
    3. Well maybe you'll have three problems. You might not have the confidence to select stocks yourself. But you have to do it. It's easy. Just select the highest yielding telecom with a recent dividend increase, or the highest yielding bank with a recent dividend increase, or one of the pipelines, or Terasen or the highest yielding life insurance company with a dividend increase in the last year. It does not matter which one. Get started. Open your discount brokerage account today.

1. WHICH STOCKS? Generally, I only buy stocks in my list…ones with good dividend growth. I know them. They are safer. In a couple of decades, I've only had a couple of losers¹. If you can cut your losses from investing, you do not have to win as much to get superior returns. I ignore all other stocks: you have to teach yourself not to get excited by 'the story' of these other stocks (usually growth stories in the past tense and often compelling).
   ¹ In 1993 I lost money with Royal Trust. They eliminated their dividend and were bought out by Royal Bank. There was a danger sign before hand: Royal Trust's yield rose to 9.2%…a full percentage point above the next stock in my list. Beware of common stocks with yields which are too high.
   TransCanada reduced its dividend in 2000 from $1.12 to 79¢. As I revise this in August 2006, TRP's dividend is back above that at $1.28 and TransCanada's price has tripled from its low of about $10. National Bank reduced its dividend in 1992 from 80¢ to 40¢. NA's dividend is now (mid-2006) $2.00 a share (NA increased it's dividend by 15.8% in 2005 alone). In 2002 Telus (T ticker) reduced its dividend from $1.40 to 60¢. T's dividend started to rise again on January 1^st 2005. These things happen, fortunately not very often. That's why we diversify, but not too much. In my own 100,000+ RRSP, I plan to hold just four stocks: a pipeline, a life insurance company, a food retailer and another yet to be decided (plus $10,000 in “fun” money to play with…in early 2006 this is in Kinross gold bought at $7.25 a year ago)
2. I try to buy my stocks when they are value priced. In 2004, that was in June and July. In 2006, it was early June. The yield charts pointed to it. Buying value is a bit hard to explain briefly, so I'll leave it for now. Generally, seeking value for me involves watching yield. When yield is higher (but not too high), good value often follows. Other value investors watch P/E (the price earnings ratio, often in the papers) or price to book value. There are different ways to identify value.
   3. I spoke with a novice investor this week. She was worried about making a mistake…buying the wrong stock or buying it at too high a price. Once you understand dividend investing, these matters will be of little concern. Here's why. If you buy a stock which grows its dividend, it's price should rise by the amount of the dividend growth. That might not happen each year because market sentiment about the stock changes from week to month. But eventually, the price of the stock will rise by the amount of the dividend growth. Therefore, if you buy a common stock and the price falls after you do buy it, with dividend growth, it's only a matter of time until the price rises. This happens to me regularly. Think about it for a minute. The odds are fifty fifty the price will rise after you buy it, right. Here's an example. If you buy a stock for $30.50 which has a dividend of $1.22 giving a 4% yield, and this common has a dividend growth rate of 7%, the price should rise by $2.13 a year (30.50 * 1.07) because the dividend will be up from $1.22 this year to $1.29 next year (1.22 * 1.07). This assumes, of course, the market still figures this stock is worth a 4% yield (1.29 / 32.64).
   
3. A novice investor has his first $5,000 ready to invest. Does it all go into just one dividend-paying common stock? That's a tough one if the novice don't yet have faith in dividend-paying common stocks. When my sister died of lung cancer in 2001 (she smoked…I don't buy tobacco stocks), I promised to set up a discount brokerage account for her daughter (she smokes too) with the $60,000 inheritance she had available. I bought five of our reliable dividend-paying stocks: 500 Emera at $16.30; 400 TransCanada at $22.50; 200 Cdn Utilities at $25.25; 300 BCE at $27.04 and finally 200 Sun Life at $38.50 in April of 2005 and 200 more SLF in october 2006 at $44.21. (an average of $8,612 in each common stock)¹. Since then all these stocks have increased their dividends. Dividend increases support the purchase price of the stock and is the reason our common stocks with increasing dividends are safer. (Check out the current prices of these five stocks…all up. As the dividend rises, so does the price…eventually.) The price might fall a bit right after you buy a stock, it's impossible to buy at the bottom every time, but eventually, down the line a few years, you really can't lose money if you buy at a reasonable price and the dividend keeps rising. As the dividend rises, so will the floor under your price. Believe it: these dividend-paying common stocks are not like regular stocks. Have faith…but don't waver from dividend-growing ones.
   ¹ If I had it to do over again, I would have bought my niece stock with a slightly lower yield and higher dividend growth. I might still sell her Emera and buy Power and sell the BCE (sold October 2006) and buy a bank. TransCanada's dividend growth has been 6.5% over the last five years; Canadian Utilities had 4.1% dividend growth. I'll keep those for her and, of course, the Sun Life (SLF) which has grown its dividend at20% a year since it became a public company some five years ago.My niece now gets an extra $2,000 a year in income from the little portfolio. And the income goes up more ever year.
   After opening your discount brokerage account and depositing the $5,000, or whatever, into it, I'd put the $5,000 all into one stock using a limit order, not a market order. However, I'd never advise another person to buy just one stock as the conventional wisdom says you should have a dozen or twenty. Eventually you will. But with $5,000 it's hard to diversify. Of course, conventional wisdom was not thinking of safer dividend-rising common stocks when they made “the wisdom”.
   Which stock? (Read paragraph #4 above again and FAQ #1.) That's your choice. I'm not an investment advisor and your guess is as good as my guess. Go down the yield list four or five stocks to a dividend-paying common with a fairly high yield and a good record of recent dividend increases over the last five years or so. Then read what you can find on the stock, and decide.
4. PRICE to BOOK is a way of valuing shares. With some reservations…the lower the price to book, the better. View it in relation to the average price to book figure for our stocks: in July of 2005 the average was 2.3. In other words, the price was more than two times book value (a bit dear). I decided to use yield to value stocks 25 years ago when I began my report and not price to book or P/E ratio. Apparently “Charles H. Dow used the dividend yield on the Dow as his gauge when deciding whether stocks were overvalued or undervalued” (Unexpected Returns, p 106 Ed Easterling). Stephen Jarislowsky, on page 124 of The Investment Zoo, says book value does not mean very much and gives some examples of why it doesn't. In conclusion, Jarislowsky says:“So book value sometimes reflects fair economic value, but often not.”
5. Analysts - Before they buy a stock, some investors take note of what analysts are recommending. The logic goes something like this: if a number of analysts, and surely analysts must know, are recommending a stock, it must be a good stock to buy.
   I don't look at what analysts are saying. My logic goes like this: if a bunch of analysts are recommending a stock, it must now be overpriced because they all did not just recommend it this morning. Brokers like to suggest stocks to buy that are recommended by analysts because, if something goes wrong, they can deflect the blame. Actually, if I happen to notice a stock with a sell recommendation (and they are few and far between), I look into that stock…if it's a good dividend growth stock. A sell recommendation could mean it's currently out of favour, and thus reasonably priced. A I write this in October 2006, Loblaw, followed by seven analysts, has a sell recommendation, a hold/sell and and a couple of holds. There's one buy and two buy/holds. Do you win by following the crowd?
6. Board lots - It's best, but not required, to buy and sell in board lots, say at least 100 shares at a time, or 50 if the stock is more expensive, or 200 shares or 500. I sold 272 BCE, for instance, before it converted to a trust. The market price at the time was $31.70. I received $31.65. I could have sold the 200 as a lot and received $31.70 and then sold the 72 shares for $31.65 but I would have paid a second commission.
7. DIVIDEND and YIELD - As 2007 starts, BMO's dividend is $2.60 a share per year, paid quarterly. Most stocks pay quarterly dividends. So, if you buy 100 shares, you will receive $65 a quarter. As I key this, BMO's price is about $69 or $6,900 for each 100 shares.
   BMO's dividend growth has been an average 13% per year for the last five years. If that average dividend growth continues, we could expect that BMO's dividend might be (2.60 * 1.13 $2.94 a year next year. This is why you buy dividend paying common stocks and not bonds. The dividend can increase. BMO's yield, if you pay $69 per share: 2.65 / 69.00 = 3.84% (dividend divided by the price). That's more than a five year GIC currently pays in interest. Next year, the yield on the BMO shares you bought this year, could be 4.34% (2.94/ 69).
   With dividend growth, the yield on the 400 BMO shares my wife bought in 1987 is now 18.8% (2.60 / 13.80). One might figure that her shares are worth now worth 400 * $69 or $27,600. But there have been two stock splits since then, so she has 1,600 shares now worth over $100,000. She paid $5,520 (400 * 13.80) for the shares in 1987. That was a lot of money back then, though. $100,000 is a lot 19 years later. Actually, my wife only owns 1,500 BMO now. We sold 100 shares a few years ago and got most of our money back. We can't lose now and we don't worry about price fluctuations in the least.
   So what do you think? Is dividend growth investing worth it? Do you have the patience to hold that long? I hope this example motivates you to do so. And the Bank of Montreal was not the best performing bank over this period.
   THE PLAN: buy good dividend-growing common stocks and hold them. Simple, eh! You can do it…without a broker.
   My wife has a few other stocks too where dividend growth has increased her yield: Cdn Utilities purchased in 1992 is now 9.5%, Aliant from 1995 at 10.8%, TransCanada from 2000 at $11.80 is 10.8%. Notice we don't buy very often. In December of 2006, she sold the last of her TransAlta as TA's yield had not grown. Her only loss over the years was a stock bought in 1999 for $20.35: SZ.A. More recent purchases; in 2005 and 2006, so yields are still below 3%; included Sun Life, Power and Loblaw…eight stock in total, stalwarts all. Buy only premium common stocks. Ignore the rest.
8. Dividend funds - You might consider a dividend mutual fund as an alternative to doing it yourself. According to tables in the Financial Post of February 20 2006, the top five year return for a dividend fund was 15.4% compounded annually. The bottom dividend fund returned 1.95% compounded annually over those same five years. Good luck picking a dividend fund: there are 221 of them with an average MER of 2.45%.
   Be aware too that some dividend funds do 'interesting' things to pump up returns: some dividend mutual funds purchase income funds and some buy stocks which don't pay a dividend. Imagine. Some dividend funds buy preferred stocks. There's no capital growth with preferred shares. Stephen Jarislowsky does not mention preferred shares in The Investment Zoo. I have never bought preferred shares and never will. Quite simply they are not preferred and there's no dividend growth. So far my retirement has lasted ten years. Hopefully it will last another ten. I don't want a fixed income. In ten years, a good dividend-paying common stock can double its dividend and your income and your capital too. Think dividend growth.
   
   Apparently there is a dividend ETF. That's fine. I don't buy ETFs either. I just buy common stock with a good record of growing its dividend.