Q&A With Gordon Pape: How to Generate U.S. Dividends

In this Q&A, financial expert Gordon Pape takes a reader through the options available for Canadian investors looking to find success in the U.S. stock market.

 

Q – I am looking to hopefully generate some U.S. dollars in dividends and down the road some stock appreciation. Proceeds might be used for purchasing a U.S. property or renting. – Dennis F.

A – For starters, you need a U.S. dollar trading account, if you don’t already have one. Then it’s a case of selecting which dividend securities you want to own. There are two possibilities.

The first is to invest in one or more U.S. dividend ETFs. This provides diversification and relieves you of the burden of selecting individual stocks. One interesting fund to look at is the Invesco S&P High Dividend Low Volatility ETF (SPHD-N). It’s coming off a bad year, but that’s because a large percentage of the portfolio is invested in interest-sensitive securities. Rising interest rates hit those stocks hard but it now appears that rates have stabilized and may turn down in 2024. That would be a great boost for real estate securities, which make up almost 18 per cent of the portfolio, and utilities, which account for 17 per cent. If the market reacts as expected in 2024, that will set the stage for some nice capital gains on top of healthy monthly distributions. These are currently about $0.17 per unit for a projected twelve-month yield of 4.8 per cent based on a recent price of $42.46. (All figures in U.S. dollars.)

For a more conventional ETF, consider the iShares Core Dividend Growth ETF (DGRO-N). It invests in a well-balanced portfolio of dividend stocks with financials as the top sector at 18.4 per cent, followed by information technology (17.4 per cent) and healthcare (16.9 per cent). As you can see, this is a very different approach than that of the Invesco fund. This ETF has a better short-term record (up over 10 per cent year-to-date) and has performed well long-term (10.5 per cent average annual return since its inception in 2014).

Alternatively, you can pick your own stocks. Some of the highest yielders on our recommended list are Atlantica Sustainable Infrastructure PLC (AY-Q, yield 8.2 per cent), Western Union (WU-N, yield 8 per cent, Verizon (VZ-N, yield 7.1 per cent), AT&T (T-N, yield 6.7 per cent), and Duke Energy (DUK-N, yield 4.2 per cent). – G.P.

Do you have a money question you’d like to ask Gordon? Send it along and then check out our Q&A section regularly to see if it was chosen for a response. Send questions to [email protected] and write Zoomer Question on the subject line. Sorry, we cannot send personal answers. 

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