Ask Nelly Anything

For my triumphant return from vacation, I decided to do a little something different.

I opened it up to the Canadian Dividend Investing community and asked y’all if there were any questions you had for me.

And because I have the best community on the internet, you guys delivered. Oh, did you ever. There were so many questions that I actually needed extra time to get to most of them. PLus, y’know, Blue Jays baseball.

Hence the rare Monday edition of the newsletter.

Just a couple notes before we get started:

1. I’m going to edit the questions for brevity so we can get to more

2. They’ll be divided into individual sections, starting with the section y’all probably want, individual stocks

There were also enough great questions that I’ve reserved some to answer in much more detail in the coming weeks and months. They deserve more than a couple of paragraphs.

Let’s get started.

Single stock questions

Susan writes in (yes, that Susan):

What do you think of Goeasy (TSX:GSY) amid the short report?

For those of you not paying attention, a few weeks ago Jehoshaphat Research came out with a short report that alleged Goeasy of doing a few different bad things and hiding the true nature of those things to investors, including:

• A change in writing off delinquent car loans, no longer doing so after 180 days

• Increasing its leniency in dealing with delinquent borrowers in general

• “Unusual” stock sales amid the departure of the CEO and CFO

Then, after this short report was released, bearish investors criticized the company for its lackluster response, pointing to the very brief press release and call with the company’s preferred analysts as evidence that the company wasn’t doing enough to counter the allegations.

There are two issues here — the short report itself and the response to it. Allow me to tackle the latter first.

I firmly believe that the best response to a short report is silence. I don’t want the managers of the companies I own to even acknowledge someone calling them a bunch of dishonest crooks. I have nothing against shorting, but definitely think shorts cross the line when they call top managers crooks.

(Shorts will argue they never do that, but IMO that’s just semantics. Anytime you accuse a management team of dishonesty you’re essentially calling them crooks)

As for what the short report brought up, I’ll say this. Banks/alternative finance companies are very attractive for short-sellers for one simple reason. All you need to do is make a bunch of noise about how the loan book is hot garbage, and a certain segment of the market will believe you. Especially folks who have been bearish for months/years beforehand.

Investors get doubly nervous when the economy sucks, too.

Ultimately, Goeasy has been in the money for dirtbags business for decades. These guys have seen it all at this point, and it has tap danced its way through weak economies before. Meanwhile, the stock trades at less than 8x earnings, which is the lowest valuation in some time. I think it’s a good time to add.

Generally John asks:

Thoughts on BK.TO??

For those of you who aren’t familiar, he’s asking about Canadian Banc Corp, a split-share stock that pays an eye-popping 14.5% yield.

I’m generally not a fan of split-share funds for a couple different reasons — the leverage, the risk to the dividend, and, perhaps most importantly, the fees involved.

Remember, a split share corporation is a pool of money essentially split into two. Half goes to the preferred shares, which are about as boring as assets get. The other half goes towards regular equity, which is then magnified with the preferred share proceeds.

This is easier to describe using a picture, so here you go:

The leverage enables the fund to pay aggressive dividends, but it comes with tradeoffs. In a bear market, bank stocks usually get hit hard. The class A shares of split corps get hit even harder because of the leverage.

Preferred shares also get first dibs on dividends, so if any of the underlying holdings cut their dividends your big ol’ yield will go away.

We’ll also note the management fee, which is almost always above that 1% range. That’s a lot.

I’m generally not a big fan of leverage or paying fees, so I avoid all split share funds for my own portfolio. I’d much rather just own the underlying Canadian banks (which I think are wonderful businesses), and move on.

Peter asks:

Do you think Tourmaline (TSX:TOU) has its eye on ARC Energy (TSX:ARX)?

I think speculating on takeovers is generally a poor idea and would suggest investors spend their time on the fundamentals.

If ARC has the kind of fundamentals that you want, then buy it for that reason.

Joey asks:

What’s your opinion on Olympia Financial (TSX:OLY)?

At first glance, Olympia Financial looks like the kind of stock we’d like around here. It offers a history of dividend growth and a succulent 6.5% current yield, plus a very reasonable valuation of about 12x earnings.

It also generates succulent returns on equity and returns on invested capital (50%+ on each)

However, there is one problem, and it’s a biggie. The company is ran by Rick and Craig Skauge, with Rick being the controlling shareholder. The Skauges get paid a bundle of money to run what is effectively a small-cap financial.

In 2023, the father/son team earned $16M+ to manage a company that did approximately $100M in revenues. That was higher than the total compensation paid to most big 6 Canadian bank CEOs. It’s ridiculously high, and the company is uninvestable until they solve this problem.

A couple people asked:

What are your top 3/5/10 REITs today?

We don’t have nearly the space to go that far into things, so I’ll quickly talk about a Canadian REIT I like today.

That REIT is Canadian NET REIT (TSXV:NET.un), which is poised to grow earnings as rates go down/it can acquire new assets. It trades at a cheap price-to-FFO ratio of approximately 8x, and the company has a wonderful record of raising the distribution over the long-term. The stock pays a yield of more than 6% with a payout ratio of just over 50%, which is an excellent combination of yield and potential growth going forward.

Canadian NET rents retail space to existing tenants like grocery stores and fast food joints. The tenants are responsible for upkeep and most other operating expenses, and the nature of the portfolio ensures high occupancy. I’m a fan.

@divgrojourney asks:

What’s your table pounding top pick today?

Coca-Cola FEMSA (NYSE:KOF) is an excellent company with a natural monopoly as the exclusive Coca-Cola bottler in much of Latin America. It trades for about 13x earnings with long-term potential to grow the bottom line by introducing new products, pushing through price increases, and population increases.

The company also has a great balance sheet, with a strong cash balance and a net debt-to-EBITDA ratio of just over 1x. In fact, the company has started hinting about returning additional cash back to shareholders over and beyond the current dividend — which offers a ~4.5% current yield today with long-term dividend growth.

Oh, and two of the three largest shareholders are the Coca-Cola Company and Bill Gates. I like that company.

My Own Advisor asks:

I’d be curious about your top-5 stocks/equity positions and rationales for them.

I’m not going to do top-five, since we’re going to discuss them in an upcoming edition of the DIY Wealth Canada pod. So I’ll pick five random stocks that are in my top 10 and just give a very quick explanation of why I like them so much:

• Dollarama (TSX:DOL) is probably the best retailer in Canada. It has succulent gross margins, terrific returns on capital, good growth potential, and gives back to shareholders by repurchasing stock

• Royal Bank of Canada (TSX:RY) is the best bank in Canada, and one of the best on the planet. It’s a terrific business that is ran conservatively enough that it should last for another 150 years

• Imperial Oil (TSX:IMO) has the best balance sheet of any oil company in Canada, a superb dividend growth streak, and is repurchasing shares like it’s going out of style

• Parkland Fuel (TSX:PKI) was dirt-cheap with assets the market didn’t love. I suspected a buyout offer was coming, but that wasn’t the entire thesis. It was a quietly good company that was poised to deliver good returns even if a buyout didn’t happen

• TD Bank (TSX:TD) was really cheap back in 2024 amid the money laundering scandal. I added to an already pretty large position back then, convinced that a combination of new management and better short-term results would send the stock higher.

Speaking of the DIY Wealth Canada Pod (and Mark!), here’s our latest episode where we spoke with Mark about all things FIWOOT, early retirement strategies, and much more.

You can get it wherever you get your podcasts.

Colin asks:

What to replace InterRent Residential REIT (TSX:IIP.un) with? Would you look at Canadian Apartment Properties REIT (TSX:CAR.un)?

CAPREIT wouldn’t be my first choice in this scenario. I prefer REITs with more exposure to more affordable markets.

Here in Canada I continue to like Killam Property REIT (TSX:KMP.un) the best. It has a lot of exposure to the Maritimes, which is pretty affordable. It also has a solid balance sheet, a yield of over 4%, a reasonable payout ratio, expansion potential funded by that good balance sheet, and an interesting mobile home part of the business that I think grows over the long-term.

There are also U.S. apartment REITs that are trading at attractive valuations, names like Mid-American Apartment Communities (NYSE:MAA).

Pierre asks:

Your opinion on Brookfield.

I think it’s a great company lead by some of the smartest guys on the planet. The company has delivered excellent returns over a very long time period.

The only problem is the stock has done extremely well since 2023. I’d be more inclined to buy closer to a 52-week low, rather than today’s levels of close to a 52-week high.

Paul asks:

What level do you think is attractive for Mainstreet Equity (TSX:MEQ)?

Mainstreet Equity is one of Canada’s great growth stocks, and it seems like nobody is paying attention. I wrote about it a few months ago when it was around $190 per share — which is around the same price shares go for today.

I continue to think shares are attractive at today’s prices. The company is poised to grow FFO/share by more than 10% annually over the long-term, and it can acquire property for significantly less than what it costs to build it. Even after renovating, cap rates are more attractive than developing from the ground up. And, if that’s not enough, these buildings are affordable for the average Canadian.

As for the right time to buy, I think shares are reasonably valued today. Sure, I’d like to get them for cheaper — who wouldn’t? — but the valuation of about 17x FFO is quite reasonable today. Especially considering the continued long-term growth potential.

Just one quick note of caution — the last few months haven’t been great on the acquisition side. This isn’t such a big deal since renovations don’t usually happen until a year or two after a property has been acquired, but it is worth keeping an eye on. The company depends on new properties to grow, and this could impact that growth in the 2026-27 time frame. Long-term I think this one is fine, but there could be a short-term blip.

Sector/ETF questions

Prairie Investor asks:

Canadian telecoms have an oligopoly, wide moat but high dividend payout ratios (sometimes greater than free cash flow). Good stocks to own or better opportunities elsewhere?

I’m still a fan of Canadian telecoms, and think the next five years will be better than the previous five years. Interest rates should fall, capex expenses should be more reasonable, and these guys seem serious about paying off debt. That should translate into higher free cash flow and ultimately more sustainable dividends.

My favourites in the sector continue to be Telus and Quebecor. I think Telus makes it through the next few years with the dividend intact, although I don’t think growth will be as robust there as before. Quebecor has the much more sustainable payout ratio, and is poised to grow the payout as it continues to expand on its wireless offerings.

Ben asks:

Many U.S., Australian, and Canadian mining firms hold historical claims or arbitration awards against Venezuela. Could companies like Gold Reserve and Aris Mining Corp benefit from regime change in the region?

In this situation you have to get three things right for the thesis to work out:

1. Venezuela has to overthrow the existing leader

2. The new government has to honour existing mining claims

3. The price of gold has to remain elevated

It’s the equivalent of trying to hit heads three times in a row, and is not the kind of bet I want to make. I’m looking for Buffett’s proverbial one-foot bars to step over, and speculating on the future leadership of a country I can barely spell does not strike me as something easy.

Paul asks

If it’s not too late I would like your opinion on CLO’s (eg ZAAA) as a place to park short term money

This is an ETF that holds collaterized loan obligations issued by large banks. It pays about a 5.3% distribution, and is pretty tiny. It only has about $40M in assets under management.

There’s a reason why this ETF is offering a yield about twice as high as comparable bond funds. CLOs have risk associated with them, and not just because of The Big Short, either. These have the ability to blow up if the world really goes to hell.

So what will happen is these CLOs will be more volatile than other places Paul would put his cash. Volatility is not something that’s tolerable for the cash/near cash part of your portfolio, so I would advise Paul to look at something safer.

I follow a simple rule in these situations. If a stock/ETF is offering a yield much higher than comparable products (in this case we’re comparing CLOs to bonds), then be very careful.

Joaozinhuu asks:

What do you think about SCHD? Is it worthy for a Canadian investor?

I think SCHD is a fine ETF if you’re looking for the kinds of dividend stocks we talk about around here. The selection process ensures it picks quality stocks that are cheap, and it places so much emphasis on dividend growth that the ETF itself is extremely likely to hike dividends over time.

There’s only one thing I dislike about it. SCHD will punt winners from the index each year as it rebalances, and I don’t think investors should do that. We should let our winners run more.

I’d love a good Canadian version of SCHD, actually. I’ve been looking for it, but can’t really find anything.

The only real issue with buying something like SCHD as a Canadian investor is you get much better tax treatment from Canadian dividends versus U.S. dividends. So the easy solution is to stick it inside your RRSP.

Han Wei Kan asks:

Would be interested to know more about European opportunities and North American companies that have decent Europe exposure.

Stay tuned for more in depth analysis on European and Latin American stocks. I think there are ample opportunities in both markets, and have plans to write about a few between now and the end of the year.

In the meantime, here’s my analysis of B&M European Value Retail.

As for opportunities in North American stocks with European exposure, the easy one is Pepsico (NASDAQ:PEP). It gets a big chunk of its business from Europe and is currently priced like growth will never return. I think it’s attractive today.

Anoop asks:

Thoughts on owning precious metal royalty stocks?

I think if you’re going to own gold/silver, the royalty companies are the way to do it. They give you exposure to the underlying metal but not in a huge way. They’re mostly financial companies that happen to have a little gold exposure.

Saying that, with gold at a crazy high and gold bugs taking victory laps on the tweeter app, I’m not a fan of buying anything precious metals related today. They’ve gone up too far, too fast.

General market/investing questions

From Sean:

Market timing generally doesn’t work…but is this time different? Convince me that it’s not time to pull some profits and increase cash levels.

This is probably a good time to remind y’all what my sell strategy is. Basically, I sell because:

1. Thesis creep: The reason why I bought the stock in the first place is no longer valid

2. Earnings growth has evaporated and I see no path towards future earnings growth

3. The valuation has become ridiculous (this is typically in the 40x earnings range)

4. If the company cuts the dividend it’s an auto-sell

There used to be a fifth rule, which was I’d automatically sell if a stock looked like it was for sale, but I’ve since ditched that one. It’s been replaced by the following rule:

5. If the stock is outside of my circle of competence, it is a sell

At this point, the vast majority of my portfolio still checks off the not-sell boxes, so I’m going to hold. I have sold a few things lately, but nothing excessive.

(As a reminder, I share all stock buys and sells with premium subs, so I don’t want to go into too much detail here)

I’ll also point out that I see value in various sectors. I think consumer staple stocks and U.S. healthcare names are cheap. I’m a buyer of a few different REITs at today’s levels. European and LATAM stocks continue to be dirt-cheap, even after European stocks have had a nice 2025 so far.

I think a rotation from more expensive names into more boring/unloved dividend stocks isn’t such a bad idea. I would not advocate folks sitting on large amounts of cash.

Rick also has a question about selling:

You need to raise some cash for an upcoming project next year. How do you decide what to sell?

In this situation I would probably sell now, rather than waiting for perhaps a higher market in the future. I just don’t think it’s a good idea to risk funds you know you’ll need in the next year.

As for deciding what to sell, I’d consult the list above and put every stock in my portfolio through that selection process. Do you own anything that is overvalued, trading at 30-40x earnings? Start there. You could also use the opportunity to cut stocks that haven’t performed as well, names that you’re holding onto despite prospects not being so rosy. This second approach has the advantage of minimizing capital gains taxes — assuming the cash is coming from a taxable account.

You could also take on a more diversified view of selling. Say you needed to liquidate 10% of your portfolio. So you’d sell 10% of everything in the portfolio. This would be somewhat costly if you’re using a broker that charges per trade, but it does take away the risk of selling the wrong thing at the wrong time.

Selling is really hard. I try to avoid it whenever possible.

Dark Star asks:

Nobody can live on dividends alone. Only cc funds can fill the income gap for retirees. Talk about that.

First off, the typical retiree isn’t living on dividends alone. Many have some sort of workplace pension, and virtually everyone will get a combination of CPP/OAS in Canada.

Secondly, the internet is filled with people who have pulled off what Dark Star says is impossible. And for every guy who is actively talking about it, there are hundreds more who are doing the same thing, just hanging out in the background.

As for covered calls, I’m still not a fan. Many of these covered call funds use leverage to goose returns, which becomes a risky proposition in a bear market. Covered calls also cap upside as well-intended option contracts don’t work out and will force a sale. You also have to either actively manage such a portfolio yourself or pay high management fees for someone else to do it for you.

If y’all want to use covered calls, knock yourself out. But a newsletter called Canadian Dividend Investing will continue to talk about dividends only, and how retiring on dividends is quietly a really good strategy.

FI Squirrel asks:

How big have you and your wife grown your TFSAs?

I’m not going to simply post a number here because that’s no fun. So I’ll say this:

We started seriously investing in our TFSAs in 2014, and caught up on missed contributions in 2015. I’ve grown my TFSA by about 12% per year, while my wife’s TFSA has lagged a little bit, returning about 10.5% per year.

Both accounts are well on pace to end up at $1M+ by the time we reach the traditional retirement age, which was always the goal.

Settling Nomad asks:

Can I retire (or be in a position to) in 10 years? Age 55 then ~$1.5M in stocks, -20 yrs of cpp contributions, nominal pension, some debt

The dirty little secret of retirement planning comes more down to what you spend versus how much money you have. In other words, cash flow is king.

Based on today’s dollars, such a portfolio looks like it’ll spin off something like $60,000 to $70,000 on a consistent basis. That should be enough for a reasonable retirement.

One thing I would focus on is getting that debt paid off before then. Zero debt going into retirement is essentially another passive income source, and squashing it is one of those low-risk smart moves that nobody wants to do in a bull market — but will really help in the future, especially when cash flow is a little bit tight.

Alien Investor asks

U.S. and International REITs in TFSA accounts. How much does the foreign tax affect their performance?

I touched on this a couple weeks ago when I wrote about U.S. REITs for the Canadian investor. 

U.S. REITs are subject to a 15% withholding tax, and foreign REITs will be subject to whatever withholding tax is charged by that country. You’re likely looking at something in the 15-20% range, but it depends on the country. Then, if applicable, you’ll have to pay Canadian taxes on amounts owed on top of that. This depends on your tax bracket, and obviously that wouldn’t apply to investments inside of a TFSA or RRSP.

Saying all this, I’d caution folks about worrying too much about the tax situation. If you find a stock in a foreign country that checks off all the boxes except you might have to pay a withholding tax on dividends received, that’s not such a bad situation. Don’t let the tax tail wag the dog, especially if you’re already in a position where you pay very little tax.

LcO asks:

How to reclaim withholding tax at source for Canadian dividends?

Canadian dividends don’t charge a withholding tax at source as far as I know. I’ve never been charged one, anyway.

This is probably a question for an accountant.

Random stuff

Genymoney.ca asks:

Your favourite place you’ve traveled to and why?

This one is easy — Iceland.

Iceland is unlike anywhere else I’ve ever been. It’s strikingly beautiful, but also weirdly exotic at the same time. There are parts of the island that don’t even look like they belong on planet earth. The mountains are spectacular, the waterfalls are amazing, and everything is so close together that you can see most of it in about three days.

In the non-Iceland category, I also really enjoyed visiting the UK, Germany, and Japan. And a special shout-out to Colombia. You should go. You won’t get murdered, I promise.

Jordan asks:

You are just on the fringe of the green/fairway. Hole is 30-40 feet away....Are you chipping or putting?

Putting, unless there’s something really goofy going on with the green that I want to fly the ball over. Chipping is probably the weakest part of my game (although putting is a close second), so my philosophy is my worst putt is going to be better than my worst chip.

Drunk Dividends has a great one:

Do you think all the effort that the average entrepreneur goes through to start a business is worth it? Or does it make more sense for the average person to just work a job and invest?

I think the average person is much better off if they just get a job and do their best to develop professionally to help maximize their overall value.

Running your own business is hard, and it gets infinitely more complex as the business grows. The buck stops with you, and there’s really no way to describe how that feels until you experience it. You have to be able pick yourself up after almost daily setbacks. And, in case that wasn’t enough, you’re going to have haters who secretly want to start their own business but instead will take out their frustration on you and publicly call you an idiot.

I’m a big advocate of finding the simplest way to do anything, and the easy way to get moderately wealthy consists of:

• Finding a good job

• Saving 20-50% of your income

• Using those savings to buy real estate and/or boring stocks

• Keep it up for a few decades

Do this and you’re pretty much guaranteed to have enough to live the second half of your life in relative comfort, and all without the headaches of having to find someone to cover some kid named Brayden’s shift when you just want to relax with your family.

Finally. The end!

Thanks everyone for your questions. You guys really delivered.

A few of you I didn’t get to, but don’t worry. I’ll address them in more detail in upcoming posts.

Thanks everyone for reading. See you all next week (at the proper time!).

And let’s go Blue Jays!