All posts by Pat McKeough

Canadian Bank Dividends vs Tariff Risk: Are TSX Bank Stocks still Safe for Income Investors?

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Canadian banks have long been core holdings for investors seeking dependable dividend income. For retirees and other income-focused investors, their established businesses and regular dividend payments can make them an important part of a long-term portfolio.

Tariff uncertainty, however, creates a new question. If trade restrictions hurt Canadian businesses, slow hiring and weaken consumer spending, could those pressures eventually put Canadian bank dividends at risk?

The answer requires looking past daily stock-price movements.

A bank stock can fall sharply without its dividend being in immediate danger. Dividend safety depends more on the bank’s earnings, capital strength, loan quality and ability to absorb credit losses.

For conservative investors, the better question is not whether tariffs will make TSX bank stocks rise or fall next. It is whether the financial foundations supporting those dividends remain strong.

How Tariffs can affect Canadian Banks

Tariffs generally do not hurt a bank in the same direct way they can hurt a manufacturer or exporter. Banks are affected because they lend money to the businesses and households operating in the wider economy.

The chain can look something like this:

Tariffs and trade disruption → pressure on businesses → weaker economic activity → more financial stress among borrowers → higher loan losses → pressure on bank earnings → potentially slower dividend growth.

Businesses exposed to tariffs can face several challenges. Imported materials may become more expensive. Export demand can weaken. Supply chains may need to be reorganized. Companies may also delay hiring, expansion or major investments when future trade rules are uncertain.

Those pressures can eventually reach bank customers.

A business with falling sales may find it harder to repay a commercial loan. A worker who loses a job or sees income growth slow may have greater difficulty making mortgage, credit-card or line-of-credit payments.

Banks prepare for some of these risks by recording provisions for credit losses, which reduce current earnings to reflect loans that may not be fully repaid.

Tariffs can also influence inflation, interest rates, business investment and consumer confidence. As a result, different parts of a bank’s business can be affected in different ways.

The economic effect is not hypothetical. In its July 2026 outlook, the Bank of Canada said Canadian economic activity had been affected by U.S. tariffs and trade-policy uncertainty, while exports remained on a lower path than before the tariffs were introduced. (Bank of Canada)

That does not mean tariffs automatically threaten Canadian bank dividends. The more important issue is whether trade disruption becomes severe enough to significantly weaken borrowers, increase credit losses and reduce bank profitability.

Falling Bank Stocks don’t necessarily mean Dividends are Unsafe

One of the biggest mistakes an income investor can make is treating a falling share price as proof that a dividend is in trouble.

Stock prices react quickly to expectations.

Investors may sell Canadian bank stocks because they expect a recession, rising unemployment, higher loan losses or slower earnings growth. Tariff headlines can also increase uncertainty and make investors less willing to own economically sensitive stocks.

Those fears can push a bank’s share price lower well before there is a serious problem with the dividend.

Dividend sustainability works differently. It depends primarily on whether the bank continues to earn enough money, maintain adequate capital and absorb credit losses while still funding its dividend.

A bank can therefore experience substantial market volatility and continue paying a well-supported dividend.

There is another reason investors need to separate price risk from dividend risk: a falling stock price automatically increases the dividend yield when the dividend itself stays unchanged.

The basic formula is:

Dividend yield = annual dividend ÷ share price

Suppose a stock pays $4 in annual dividends and trades for $100. Its yield is 4%.

If the price falls to $80 while the dividend remains $4, the yield rises to 5%.

That higher yield may look attractive, but it does not automatically mean the stock offers better or safer income. Sometimes a rising yield simply reflects growing investor concern about future earnings or financial risk.

A conservative investor should therefore ask two questions: Why has the yield increased, and are the fundamentals supporting the dividend still healthy?

Canadian bank dividend yields should never be judged in isolation.

5 Signs a Canadian Bank Dividend remains well supported

No single financial ratio can guarantee bank dividend safety. A stronger approach is to examine several indicators together and, importantly, watch how they change over multiple quarters.

1.) The Dividend Payout Ratio remains Manageable

The dividend payout ratio measures how much of a company’s earnings are being distributed to shareholders as dividends.

If a bank earns substantially more than it pays out, it has more room to deal with weaker profits before the dividend itself comes under pressure.

Investors should avoid treating one payout-ratio percentage as a universal dividing line between “safe” and “unsafe.” Instead, look at whether earnings continue to cover the dividend comfortably.

The trend also matters.

If the payout ratio climbs quickly because earnings are declining while the dividend stays unchanged, that deserves attention. The bank may have less flexibility if conditions deteriorate further. Continue Reading…

Knowing the difference between penny stocks and blue-chip stocks will boost your portfolio returns

Understanding the difference between penny stocks and blue chip stocks will help you pick the best investments for your portfolio. Learn all about it now.

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In penny stocks the odds are against you. So, time works against you. The longer or more often you play, the likelier you are to lose. On the other hand, blue chip stocks are your best promise of investment quality: and of strong returns for years to come.

Knowing the difference between penny stocks and blue chip stocks is important for your portfolio returns.

Understanding the difference between penny stocks and blue chip stocks: Penny stocks are highly speculative, while blue chips have proven track records

If you lose money in speculative pennies or other low-quality stocks, you may think your main mistake was bad timing. That’s a misconception. All penny stocks rely on luck to become wildly profitable. Even with luck on the side of the penny stock investor, if they play long enough, the “house odds” eventually triumph over any run of good luck for the investor.

Still, investors looking to add to the aggressive portion of their portfolios may turn to the strategy of buying speculative penny stocks.

They should note, however, that there are several potential risks when investors venture into penny stocks.

Buying low-quality penny stocks is one of those things that can appear to be successful before it goes badly wrong. Some get hooked on it, since low-quality stocks can be highly profitable over short periods. That’s because they are generally more volatile than high-quality stocks.

On the other hand, blue-chip companies can give investors an additional measure of safety in volatile markets. And the best ones offer an attractive combination of moderate p/e’s (the ratio of a stock’s price per share to its per-share earnings), steady or rising dividend yields (annual dividend divided by the share price), and promising growth prospects.

Understand that there is a big difference between penny stocks and blue chip stocks over time

Penny stocks: Although the price may seem right, the average penny offers a poor long-term return. After all, it’s hard to create a successful business. It’s much easier and cheaper to set up a company and sell stock to the public. That’s why bad penny stocks always outnumber good ones.

Penny stocks can also be more easily manipulated than most stocks that trade on exchanges because of their generally low trading levels and the resulting price volatility. Combine this with a lack of regulatory oversight on some stock exchanges and the fact these companies are easy to launch, and you can appreciate why investment frauds are more common with penny stocks.

Blue chip stocks: The blue-chip investments we recommend have a history of profits going back for at least 5 to 10 years. Companies that make money regularly are safer than chronic or even occasional money losers.

Blue chip companies can give investors an additional measure of safety in volatile markets. And the best ones offer an attractive combination of moderate p/e’s (the ratio of a stock’s price to its per-share earnings), steady or rising dividend yields (annual dividend divided by the share price) and promising growth prospects.

Know the difference between penny stocks and blue-chip stocks to protect your portfolio from loss

We feel most investors should hold the largest part of their investment portfolios in securities from blue-chip companies. All these stocks should offer good “value,” that is, they should trade at reasonable multiples of earnings, cash flow, book value and so on. Ideally, they should also have above average-growth prospects in expanding markets.

In general, on the other hand, penny stocks have lower trading volumes or liquidity, and this lack of liquidity means it may be more difficult to sell a stock when you want to. They also suffer from large price fluctuations, so any bit of news will cause a penny stock’s price to rise or fall.

We think you should apply our sell-half rule with pennies. Selling half your holdings after the stock doubles is a good strategy for any high-risk investment, but especially so for penny stocks.

This can give you a clearer perspective on what to do with the other half of your investment. After all, if you are too slow to sell speculative stuff, your profits and even your principal can evaporate all too quickly.

Ultimately, penny stocks should be limited to a small part of any diversified portfolio. You should only buy the most speculative of them with money you can afford to lose.

Use our three-part Successful Investor approach for better investment results

  1. Invest mainly in well-established, dividend-paying companies;
  2. Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; Consumer; Finance; Utilities);
  3. Downplay or avoid stocks in the broker/media limelight.

What would persuade you to buy penny stocks over blue chip stocks?

Have you been tempted to buy penny stocks? What made you choose them?

Pat McKeough has been one of Canada’s most respected investment advisors for over three decades. He is the founder and senior editor of TSI Network and the founder of Successful Investor Wealth Management. He is also the author of several acclaimed investment books. This post was originally published in 2014 and is updated regularly, mostly recently on March 26, 2026. It is republished on Findependence Hub with permission.

The Best High-Risk Stocks to Invest In for Aggressive Investors

Aggressive investors looking at high-risk, aggressive stocks to invest in should only allocate a small part of their portfolios to those investments 

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There are always investment-related worries to occupy the minds of investors looking for good Canadian stocks; but focusing on high-risk, aggressive stocks to invest in just makes it worse. That applies even to “hot” investments similar to a ChatGPT stock.

It’s only natural to worry about your investments, even good Canadian stocks, whether that’s during the kind of bull market we saw in 2021, or the COVID downturn of 2020 or the current volatile market.

But being able to overcome that worry is one of the most important traits a successful investor can have. It’s especially important when investors are looking for high-risk stocks to invest in.

Anxiety recedes with investment quality, diversification and balance

You’ll find that many of your worries centre on things that are unlikely to happen; that are already largely discounted in current stock prices; and that probably won’t matter as much as you feared they would. That also applies when you’re looking for the best high-risk, aggressive stocks to invest in, like something similar to a ChatGPT-like stock or other AI star.

You get a much better return on time spent if you devote less of it to worrying about high-risk, aggressive stocks to invest in, and more of it on forming an investing strategy that focuses on good Canadian stocks, for example. Create a strategy that is built upon analyzing the quality and diversification of your investments, and the structure and balance of your portfolio.

There’s another advantage as well. A calm investor is much less likely to react in haste and make sudden decisions that could prove to be damaging in the long run such as devoting a large portion of your portfolio to a ChatGPT-like stock or another darling of momentum investors instead of focusing on good Canadian stocks.

Pink sheet stocks are the Wild West of U.S.-based stocks—and only for investors looking for high-risk stocks to invest in … with money they can afford to lose

Companies that trade on the U.S. over-the-counter market are said to trade as “pink sheet stocks,” a holdover from the days when the quotes for these stocks were printed on pink paper.

Today, OTC Markets Group (formerly Pink OTC Markets Inc.), a private company, is the main provider of pricing and financial information for the over-the-counter (OTC) securities markets.

OTC Markets Group operates a centralized information network that includes services for market makers, issuers, brokers and OTC investors. This information aims to make OTC trading more efficient and improve access to capital for OTC issuers.

Unlike good Canadian stocks, many companies that trade “pink sheets stocks” usually don’t have sufficient market caps, or enough shareholders, to meet most stock exchanges’ minimum criteria. That includes several penny stocks that purport to be the next ChatGPT stock.

Over-the-counter shares are often sporadically or inactively traded. That can make buying penny stocks and pink sheet stocks (and selling them) more difficult and expensive than shares of larger stock exchanges.

As well, over-the-counter stocks trade through “market makers,” or traders who maintain an orderly market in a particular stock by standing ready to buy or sell shares. The market maker’s job is to maintain a firm bid and ask price for their assigned securities. If a broker wants to buy a stock, but there are no offers to sell it, the market maker fills the order by selling shares from their own firm’s account. If a broker wants to sell, but no one wants to buy, the market maker buys the shares.

Over-the-counter stocks may at times seem to offer extraordinary opportunities, but this can be an expensive illusion. Most legitimate companies with substantial growth potential will want to leave the over-the-counter market as quickly as possible, and move to the major markets. This tilts the odds against you.

That’s why we’ve always stayed out of the over-the-counter market, and are likely to continue to stay out as we focus on good Canadian stocks and good U.S. stocks. There are just too many attractive buying opportunities in major markets where risk is lower and your chances of making money are much better. Continue Reading…

Safer investments for retirees: How to retire with less stress

Overall we see safer investments for retirees as ones that focus on a long-term conservative strategy and make calculated use of RRSPs and RRIFs to boost returns

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Retirement planning is becoming more challenging for Canadians because they’re living longer and need larger retirement nest eggs.

This often manifests itself in “pre-retirement financial stress syndrome.”

That’s the malady that strikes when it dawns on you that you may not have enough money saved to be able to earn the retirement income stream you were banking on.

 

To alleviate this worry, we recommend Successful Investors base their retirement planning on a sound financial plan. Here are the four key variables that your plan should address to ensure you have sufficient retirement income:

  1. How much you expect to save prior to retirement;
  2. The return you expect on your savings;
  3. How much of that return you’ll have left after taxes;
  4. How much retirement income you’ll need once you’ve left the workforce.

Note, though, that if you’re heading into retirement and are short of money, you should move your investing in the direction of safer, more conservative investments. That’s a far better option than taking one last gamble.

Moving into “too safe” investments for retirees can sharply cut your long-term returns

This applies as well to “risk-reducing strategies,” of which there are many. One of the most common is the urge to “go into cash” (also known as “taking money off the table”) when you foresee a market downturn. Like all risk-reducing strategies, this one can seemingly work from time to time, by getting you out of the market before a drop. But it’s even more effective at ensuring that you are out of the market when prices are shooting upward.

In the stock market, downturns do come along from time to time. But they are far less common than fears of downturns, which are virtually non-stop.

Editor’s Note: Last chance to register for today’s free AI investing webinar, hosted by The Successful Investor and Findependence Hub. The webinar begins today at 11:30 a.m. EDT and will cover practical ways to approach investing in A.I. stocks while keeping risk in mind. We shared the full details in our Canada Day blog post last week, with a reminder on July 4. If you would like to attend, you can still register here.

Pat McKeough has been one of Canada’s most respected investment advisors for over three decades. He is the founder and senior editor of TSI Network and the founder of Successful Investor Wealth Management. He is also the author of several acclaimed investment books. This article was published on June 4, 2026 and is republished on Findependence Hub with permission.

Myths about Dividend Stocks in RRSP vs TFSA: Busted

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Dividend investors love rules of thumb. Rules are comforting, like a warm blanket. Unfortunately, some of the most popular rules around dividend stocks in RRSP vs TFSA are only partly true.

The cost is usually quiet. You rarely see a dramatic mistake on a single statement. Instead, you get small leaks that compound: a bit of withholding tax you cannot recover, a little extra taxable income later than you expected, and a placement decision that is hard to unwind without triggering tax.

Here is a myth-by-myth cleanup, with practical takeaways you can apply without needing a spreadsheet the size of Manitoba.

Myth #1: TFSA is Always Best for Dividends

Why it sticks: a TFSA is tax-free in Canada, so it sounds like the obvious place for any income.

The reality is more nuanced. A TFSA is often an excellent home for dividend income, but not every dividend behaves the same way once cross-border tax rules enter the room.

What’s true (and what’s not):

A TFSA is great for many dividend investors, especially when flexibility matters. The part that breaks is the word “always.”

The key exception: U.S. dividends in a TFSA

U.S. dividends paid into a TFSA commonly face 15% U.S. withholding tax, and the TFSA usually does not let you recover that amount. The Canada U.S. tax treaty generally treats RRSP and RRIF type plans differently than a TFSA for this purpose.

This is the classic U.S. dividend withholding tax TFSA vs RRSP issue. It is not theoretical. It shows up as less cash hitting your account.

When a TFSA is often best for dividends

A TFSA is often a strong home for:

  • Canadian dividend payers (TSX stocks and many Canadian-listed dividend ETFs), since there is no U.S. withholding problem on Canadian dividends
  • investors who value tax-free withdrawals and flexibility later
  • people who want retirement income planning that does not add to taxable income

Takeaway: A TFSA is fantastic, but it is not automatically best for every dividend source.

Myth #2: U.S. Withholding gets Refunded in a TFSA

Why it persists: investors remember that in a taxable account, foreign withholding can sometimes be offset with a foreign tax credit, so they assume the TFSA works the same way.

Reality: inside a TFSA, the U.S. withholding is generally not recoverable because you cannot claim the foreign tax credit there.

RRSP vs TFSA: the simple $100 dividend example

Using round numbers:

  • U.S. dividend in TFSA: $100 declared, $85 received (15% withheld, typically unrecoverable)
  • U.S. dividend in RRSP: $100 declared, $100 received (treaty relief commonly applies when held properly)

That 15% gap is not a one-time annoyance. If you reinvest and hold for years, it compounds.

Takeaway: if you hold U.S. dividend payers inside a TFSA, plan for some permanent leakage.

Myth #3: DRIPs are Taxed inside RRSP/TFSA

Why people think this: in non-registered accounts, reinvested dividends are still taxable each year, so it feels like reinvestment must create a tax event everywhere.

Reality: registered accounts are designed so you do not report income annually.

  • TFSA: investment income and growth in the account are tax-free
  • RRSP/RRIF: investment income is tax-deferred, and withdrawals are taxed as income later

So a DRIP inside an RRSP or TFSA does not trigger annual Canadian tax reporting.

One practical record-keeping note

In taxable accounts, adjusted cost base tracking matters, especially with DRIPs.
Inside RRSP and TFSA accounts, adjusted cost base tracking is generally not required for Canadian tax reporting because you are not reporting gains each year.

Takeaway: DRIP taxes are a taxable-account headache, not a registered-account one.

Myth #4: RRSP Withdrawals are “Lightly Taxed,” just like TFSA

Why it trips people up: the RRSP deduction at contribution time is memorable, so people assume the withdrawal has special treatment too.

Reality, stated plainly: RRSP withdrawals are taxed as ordinary income. They do not come out as dividends, and you do not get the dividend tax credit on the way out.

This matters for dividend-focused RRSP portfolios because the income can stack on top of CPP, OAS, and other retirement income sources.

Two income-planning issues that surprise dividend investors 

  1. RRIF minimum withdrawals can force taxable income once you convert, and the minimum usually rises with age.
  2. Higher taxable income can increase OAS recovery tax risk. TFSA withdrawals do not add to taxable income, but RRSP and RRIF withdrawals do.

Bottom line for dividend investors:

  • RRSP: tax-deferred growth now, taxable income later.
  • TFSA: tax-free growth and tax-free withdrawals.

Takeaway: the account wrapper changes the after-tax experience, even if the underlying holdings look the same.

Myth #5: All Dividend ETFs face the same Withholding

Why it sounds reasonable: an ETF is “just a wrapper,” so withholding must be the same everywhere.

Reality: withholding can vary based on: Continue Reading…