U. S. Equities

Minus six point three per cent per year for the S&P 500 in Canadian dollars for the decade ending May 31 2009 is one reason I am glad I did not begin to follow American equities. That's - 6.3 annually. That's negative. On the other hand, over the same decade, roughly, the Canadian dividend stocks in my list had a average annual return of 9.0%. That's per year too. To obtain the difference between - 6.3 and + 9.0 do you add or subtract?

  • From 1954 to 2008 the annual average real return (after inflation) for Canadian equities was 9.24%. What was the real return for American equities? 5.62%. That's quite a difference, eh! Source DMS p 220 Wall Street Revalued, 2009, by Andrew Smithers. There's a book review inside. Thinking of buying and holding? Read page 191. You will.

2. The currency risk is another reason I do not follow U. S. equities. I don't think much of the outlook for the American dollar. On August 15 1971 the U.S. dollar became a piece of paper. Our dollar at least has the perception of commodity backing. 3. I'd lose the benefit of the Canadian dividend tax credit¹ and would have to pay full tax on American dividends. 4. I have the diversification I need with Canadian dividend stocks. You might have different diversification requirements. 5. The year 2008 proved Canadian dividend payers were more reliable. 6. I reckon I should concentrate on what I do best…Canadian dividend growth stocks. 7. I shop Canadian…not at Walmart, not at Home Depot nor at Starbucks: the profits stay in Canada if we buy from Canadian owned firms and Canada grows. We support local firms. 8. American equities are adequately covered by U.S. publications such as Morningstar's Dividend Investor. 9. Merchant's broad U.S. dividend achievers returned less than one per cent a year for the ten years to January 2009. 10. American support for the illegal Israeli settlement expansion in Palestine bothers me a lot. 11. We do not need U. S. dollars for travel. We use Euros in France.

  • ¹ A person can have about $40,000 in Canadian sourced dividends and not pay any tax if their other income is only a few thousand a year. If one of you is, or has been, a stay-at-home spouse, give this top priority. All that growing income, and no tax: what a retirement plan. Start immediately! It takes quite a while to build up $40,000 in dividend income.
  • The 15 per cent withholding tax paid on U.S. dividends inside a tax-free savings account here in Canada is not refundable.
u._s._equities.txt · Last modified: 2010/05/27 07:09 by tom
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