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A dividend is a company sharing a piece of its money with you as a reward for owning stock in it. They are usually paid out quarterly, but different companies/funds can have different schedules. 

For example: 

A company has a 20 cent dividend yearly.

You own 100 shares of the stock.

You would make 20 dollars/year as the dividend, generally paid out as $5 four times in the year. 

Usually these are more established, older companies with stable profits and future expectations.

– Oil, Real Estate, Telecom etc

This is opposed to rapid growth companies and startups who don’t really pay dividends, because their money is being used to grow and build up market cap.

These dividends are usually in cash but can also be stock compensation, where they essentially give you more ownership as the dividend. 

Dividend yield%= annual dividend $/ Share Price $

So if you get an annual dividend of $20 and the share price is $200/share

Yield= 10%

Although this sounds good, a high dividend yield doesn’t necessarily mean a company is a good investment. Look at rest of the information about the company too, not just dividend yield.

Risk- are they on a good trajectory? Do they have a plan for the future?

Cash flow statement- do they have free cash flow to actually spend on dividends?

Is it a secure company? Past performance doesn’t mean future performance.

Pay Out vs Invest- why are they paying out so much? Can they not grow any more?

Other details:

Announcement date: when dividends are announced by company management on (or declaration date) and must be approved by the shareholders before they can be paid

Ex-dividend date: The date on which the dividend eligibility expires. For instance, if a stock has an ex-date of March 31, then shareholders who buy the stock on or after that day will NOT qualify to receive the dividend. Shareholders who own the stock one business day prior to the ex-date, or earlier, qualify for the distribution.

Record date: The record date is the cut-off date, established by the company to determine which shareholders are eligible to receive a dividend or distribution.

 As an example, a company that is trading at $50 per share declares a $2 dividend on the announcement date. As the news becomes public, the share price may increase by $2 and hit $52.

If the stock trades at $53 one business day before the ex-dividend date. On the ex-dividend date, it’s adjusted by $2 and begins trading at $51 at the start of the trading session on the ex-dividend date, because anyone buying on the ex-dividend date will not receive the dividend.

Payment date: when the company/fund issues the payment of the dividend 

Dividends paying stocks/funds are a great addition to your portfolios.

They give you a nice cash flow as the stock itself (hopefully) grows over time. 

There are a few different ways you can go about finding and adding them.

You can go to any stock organizer, and google “dividend paying stocks” then do your research.

There is also a fund of SNP Aristocrats which are companies that have been in the SNP 500 for 25 years and have been paying a dividend for that time.

Many general ETF’s also pay out dividends as well as REITS. 

DRIP which is a dividend reinvestment plan is great too, where the dividends you earn are automatically re-invested to buy more the stock. This way you are benefitting from dividends, and our usual, compound interest. 

I am not a trader. I am an investor. I only invest in ETFs and REITS.

I do not do individual stock trading and analysis, so I can’t speak to that.

How you want to approach this is up to you and depends on your risk tolerance, goals, interests, and time available. 

Till Next Time

A bond is a loan from an investor to a borrower such as a company or government. This is how they raise money to use. Think of yourself as the bank, and you are giving them money to use and being paid interest for it.

• Government bonds
• Corporate Bonds
• Municipal Bonds
• Many more

It’s considered a fixed income instrument because the terms are set at the beginning and it pays out according to those barring a default.

Owners of bonds are debtholders, or creditors, of the issuer.

Bond details include

• end date/maturity date when the principal of the loan is due to be paid to the bond owner
• terms for variable or fixed interest payments made by the borrower and

When they will be made

Maturity can be anywhere; 1-30 years

• Less than 1 year= Commercial Paper or Bills
• 1-10 years= Notes
• 10-30years= Bonds

New Issue=company raising money thru bond

Face value-=cost to buy bond, usually set “at par”= $1000 per bond

• The actual market price of a bond depends on a number of factors: the credit quality of the issuer, the length of time until expiration, and the coupon rate compared to the general interest rate environment at the time.

Coupon= interest from bond usually paid out twice per year

Coupon rate= interest rate

Callable- after certain time, they can return principle to you and whatever interest you earned in the time they held it and don’t have to pay interest after that. This is usually part of the terms.

Bond prices are inversely correlated with interest rates: when rates go up, bond prices fall and vice-versa.

You can sell your bonds to other investors or  buy bonds from other individuals—long after the original issuing organization raised capital so you don’t have to hold a bond all the way through to its maturity date. 

Can also repurchase the bond if interest rates decline, or if the borrower’s credit has improved, and it can reissue new bonds at a lower cost.

Backing for bonds is typically the payment ability of the issuer to generate revenue, although physical assets may also be used as collateral.

Because corporate bonds are typically seen as riskier than government bonds, they usually have higher interest rates.

The bond market tends to be less active than stock market, so commissions can be higher to buy them.

A stock is a type of investment that represents the ownership of a fraction of a corporation, whereas in a bond, they just borrow your money, pay it back with interest and the relationship is over.

There are pros and cons to both which is why people generally hold a mix in their portfolios and more bonds as they age.

Bonds are generally safer, but have less of an upside than stocks potentially do.

Depending on your risk tolerance, age, responsibilities and goals, you’ll have to assess for yourself where you want to put your money.

As a young guy, with no kids; I don’t currently hold any bonds.

As people age they may choose to hold 70 % stocks, 30% bonds and go progressively towards more bonds, and less stocks.

Cheers

Most people get paid, pay their taxes then spend the rest of their money, wondering why there is nothing left to invest or do anything productive with.

You need to set up a system for yourself that puts your money on a converyer belt for you and gives every penny a job to do without you having to think about it.

The very basics are to have a portion towards savings, investing and spending. These proportions will look vastly different depending on your life situation, responsibilities, financial situation etc.

A general prescription to start with is 75, 15, 10 where you are allowed to spend 75% of your money, you have to invest 15% and save 10%/ This really is the very basics, you should quickly surpass this. But for now, this is the funnel you can start with. Either have three separate bank accounts that automatically take these amounts from your chequing, or do it yourself the second you get your paycheck.

Saving

Again, how much you save will depend on your responsibilities, expenses and life situation. Save 10% of your income until you get to 3-12 months of savings, depending on you. After that, take this 10% and put it in the investing bucket. You don’t want to save too much because inflation (separate video) will eat into the value of your money.

Spending

Get a piece of paper or an excel sheet.

Write down how much you earn, post-tax in a month.

Pull up your previous month’s statement and start writing out your expenses. This will be painful but you need to do it.

Be honest with yourself and decide where to cut back.

You now know that you have to save 10% and invest 15% no matter what. That money is not even available to you. Think of it as a tax to the government. Doesn’t matter how you feel about it, it needs to get paid.

So now 25% of your paycheck is gone in those two things, no questions asked. Non-negotiable.

With the remaining 75%, start with your staples; grocery, rent, vehicle, phone bill etc.

These are your foundations. Be smart about how you spend here too and try to negotiate what you can. We have sperate posts about how much you can actually afford in these areas but lets move on for now.

After your initial 25% and foundational spending, you have left over what you are actually allowed to spend.

I am not your mom or dad. Be an adult and be honest with yourself about what you can actually afford. The rule of 5 applies in most cases where if you can’t afford 5 of them, you can’t buy 1 of them.

Be honest about your needs and wants and apply some delayed gratification here.

These days, it is easy to buy whatever you want, without actually being able to afford it through debt. That’s a very bad idea and sends you down a path of misery.

The math will always math at the end of the month. Be honest, be mature and spend like an adult.

Growth

Now you have 15% of that initial pay check that you must invest to get wealthy over time and secure your future.

You need your money working for you if you ever hope to become financially free.

There are tons of videos and some of our posts that talk about how to invest, where to invest etc.

Again, this very much comes down to your risk tolerance and  life situation as well as goals. Generally, the higher the risk, the higher the reward.

Me personally, if I am going to take risk, it will be by betting on myself and investing into growing my skillset and businesses.

I max out my tax free investing accounts with boring ETFs and REITS. I don’t think about it. I don’t analyze stock charts. I put my money there, and let time do its thing.

Every penny left over after that in this bucket, goes into my own businesses and improving myself and becoming more valuable in the marketplace.

Depending on your personality, risk tolerance and goals, you can invest into real estate, stocks, crypto, franchises etc. We’ll chat more later about investing specifics but the above is what I’d suggest to a friend. The point is, you need to put a bare minimum of 15% of your paycheck to work for you while you sleep and enjoy life.

And there it is. A proper budgeting system that gives every penny in your life a role to do.

Once you have this locked down, try to decrease spending and increase investing.

And at all times, keep becoming better at what you do and looking for better opportunities to grow the initial pie you start this process with.

Cheers

When I was in university, struggling through pre-med classes, I was a jealous, naïve young man.

I used to follow a bunch of sports teams and leagues; the NBA, NHL, MLB you name it. It was my guilty pleasure watching my favourite teams.

So I would get notifications on my phone when my favourite team would sign a player. 

The numbers made me cringe. $40 million a year for playing basketball?! $11 million a year for a hockey player?! I love playing basketball and road hockey, I’m not getting paid. What the hell!

Then as I got into educating myself about money, I understood an often overlooked, yet simple and important concept:

Money= Value

Value= Solving Problems

It really is that simple.

You get paid for the value you bring in the marketplace.

Sure, I can set up a business where people will have to pay to come watch me play basketball or hockey with my friends on the weekend. It would fail miserably and rightfully so. Simple because I am not good enough at hockey or basketball.

The market doesn’t care to see that. When I was a medical student, I didn’t make any money, in fact I had to pay a ton of money to learn a valuable skillset.

As a resident physician, I got paid a little bit because I knew enough to manage simple medical things on my own, but not as much as a staff physician, so I didn’t get paid like a staff physician. 

If you are broke or not making money you’d be happy with, it is because you are simply not valuable. Hurts to hear but it is the truth.

Of course, as human beings, we are all equally valuable and deserve to be treated that way. But in the marketplace, we are not all equally valuable and the market is the one who decides how much we are worth.

LeBron James can make $40 million a year playing basketball because he brings enough eyes and attention to the team he plays for, that it justifies them paying him so much.

I could make 300-500k a year as a physician because the market decides that’s what my services are worth.

It took learning this tough lesson to understand that the path I was on would not bring me wealth I desired. I would have to build businesses that the market finds valuable and invest in valuable assets to get to where I wanted to go.

You are tasked with the same thing.

You have to be honest with yourself and decide what you are naturally good at, and how you can improve on it to provide value to the market.

The more value you provide to others, and the more problems you solve for them, the more comes back to you in the form of money.

The ideal is when what you are good at is what you enjoy and what the market is willing to pay for. This comes with time, experimentation and adjusting along the way.

You won’t know until you taste and try things. Pursue your desired skillsets and curiosities in the form of providing value to the marketplace whether through a job or creating your own business.

Do you nerd out about basketball but you’re 5’8 with no hops? Build a YouTube channel analyzing games or a coaching business for local teams.

Are you a big coding geek? Get in touch with a business in your niche of interest and build them an app that makes things more efficient for them.

You need to find a combination of the natural proclivities you have, what you are willing to learn and improve on and how you can package that up as a product or service for the market to pay you for.

Don’t be angry and upset. If you are not making the money you desire, you are not providing enough value to the market in the way it wants it.

Learn, improve, adjust and keep going.

The more problems you solve, the complexity of those problems, the scale at which you can solve them, the more you get paid.

Remember, the value you provide is the value you get back.

Solve people’s problems, take away their pain, and they will pay you.

The examples are all around you.

Cheers