Hi, I’m Curtis Reker, founder of DividendYieldSeeker.com and a DIY investor for 15+ years. My investing journey didn’t start with a string of successes; it began by making some of the most common and costly dividend portfolio mistakes imaginable. Like so many others, I dove into the market headfirst, chasing trends and falling for classic pitfalls. That approach cost me a large sum of my hard-earned money and left me with a bruised ego.
That painful experience could have been the end of my story. Instead, it was my beginning. It forced me to a turning point and led me to pick up a copy of Benjamin Graham’s The Intelligent Investor. That book didn’t just change my strategy; it reshaped my entire philosophy about money, risk, and the market.
This blog is the result of that transformation. I’m here to share the hard-won lessons from my failures and the disciplined principles that helped me rebuild. I made these critical mistakes so you don’t have to.
Mistake #1: Choosing Hype (SCHD vs JEPI) Over a System
Log onto any investing forum and you’ll see it: the endless, emotionally-charged war between SCHD and JEPI. This isn’t just a ticker-tape battle; it’s a clash of philosophies.
- The Dividend Growth Camp (SCHD): These are the accumulators. They champion the Schwab U.S. Dividend Equity ETF (SCHD) for its portfolio of high-quality, blue-chip companies with long histories of increasing their dividends. Their goal is Total Return Later, building wealth through the relentless power of compounding growth over decades.
- The High-Yield Income Camp (JEPI): These are often retirees or those needing cash flow now. They gravitate to the JPMorgan Equity Premium Income ETF (JEPI) for its massive monthly distributions, generated by selling covered call options. Their goal is Income Now, and they’re willing to trade some long-term growth for it.
The mistake I made early on was believing I had to pick a side. I wasted time trying to declare a “winner.” The intelligent investor knows the real question isn’t “which is better?” but “how can these tools serve my personal plan?”
The Intelligent Solution: The Core and Satellite Strategy
Instead of a “vs.” debate, think “and.” I now view this through the lens of a Core and Satellite portfolio.
Your Core: For most long-term investors, SCHD represents the ideal core holding. It’s your foundation—a low-cost, diversified engine for capital appreciation and steadily growing dividend income. Your Satellite: JEPI can act as a tactical “income kicker.” For an investor nearing retirement, adding a 10-20% allocation to JEPI can boost current cash flow to bridge an income gap without abandoning the long-term growth of your core.
The lesson: Stop looking for a magic bullet. Start building a system where different tools perform specific jobs in your portfolio. Read more about how to build a Core and Satellite Strategy here.
Mistake #2: Ignoring the US Dividend Withholding Tax for Canadian
This is one of the most technical—and costly—dividend portfolio mistakes a Canadian investor can make. I learned this one the hard way, by leaving money on the table year after year.
When you, as a Canadian, receive a dividend from a U.S. stock like Apple or an ETF like SCHD, the U.S. government (the IRS) withholds 15% of it before you ever see a dime. This is governed by the Canada-U.S. tax treaty, which you can read about on the Government of Canada’s website.
The critical mistake lies in where you hold those U.S. stocks.
- In a TFSA (Tax-Free Savings Account): That 15% withholding tax is gone forever. It is an irrecoverable loss. There is no way to claim it back.
- In an RRSP (Registered Retirement Savings Plan): Because the tax treaty recognizes your RRSP as a retirement account, the 15% withholding tax is completely waived.
The real danger here isn’t the initial loss; it’s the compounding drag. A $45 tax on a $300 dividend might seem small.
But it’s not the $45 you lose today that matters most. It’s the thousands of dollars that $45 could have grown into over the next 30 years. You’re not just losing money; you’re extinguishing its future growth potential.
The Intelligent Solution: Strategic Asset Location (RRSP vs. TFSA)
The rule for effective asset location in Canada is brutally simple and non-negotiable for an efficient portfolio:
Your RRSP is the prime location for U.S. dividend-paying stocks and ETFs. Your TFSA is best used for Canadian dividend stocks (which have no withholding tax) and growth stocks that don’t pay a dividend.
Don’t let a simple administrative error silently erode your wealth for decades.
Mistake #3: Chasing High Yields into a Dividend “Yield Trap”
One of the most powerful of all Benjamin Graham investing principles is the concept of a “margin of safety“. The biggest threat to this principle is the siren song of the “yield trap.”
A yield trap is a stock with a dangerously high dividend yield that masks a collapsing business. The yield formula is Dividend / Price. As the stock price plummets due to poor performance, the yield mathematically skyrockets, luring in investors who think they’ve found a bargain.
They haven’t. They’ve found a trap.
The perfect, painful case study is the fall of 3M (MMM). For over 60 years, it was a “Dividend King,” relentlessly raising its dividend. But under the surface, the business was rotting due to massive legal liabilities and declining cash flow. Investors who saw the rising yield and bought in based on its history were crushed when the company finally cut its dividend in 2024, vaporizing their income and crystallizing huge capital losses.
The Intelligent Solution: Be a Financial Detective
A dividend cut is rarely a surprise. It’s the final symptom of a long-festering disease. You must learn to spot the warning signs:
- An Unsustainable Payout Ratio: Is the company paying out more than 70-80% of its profits as dividends? If the dividend payout ratio is over 100%, it’s funding the dividend with debt—a house of cards. 3M’s payout ratio exceeded 90% in the quarter before the cut, a classic red flag.
- A Mountain of Debt: A heavily indebted company has no flexibility when trouble hits.
- A Long-Term Stock Price Decline: The market is telling you something is wrong. Listen.
The lesson: A company’s dividend history is a resume, not a guarantee. Your real margin of safety comes from analyzing its current financial health.
Mistake #4: Ignoring Macro-Economic Factors Like Interest Rates
You wouldn’t go sailing without checking the forecast. Why would you manage a portfolio without understanding the economic environment?
The single most important factor today is the impact of interest rates on stocks. The relationship is simple:
When risk-free government bonds or GICs offer a 5% yield, a dividend stock yielding 4% suddenly looks much less attractive. This puts pressure on the stock prices of income-oriented sectors, especially Utilities and REITs, which carry a lot of debt.
I used to think of my portfolio as a collection of individual stocks, isolated from the world. This was a costly error. The reality is that broad economic forces act like a current, either pulling your portfolio forward or dragging it back.
The Intelligent Solution: Develop a Macro Playbook
This does not mean becoming a frantic market timer. It means being “weather-aware” and strategically tilting your portfolio.
- In a falling-rate environment: Sectors like Utilities and REITs can get a significant tailwind as their yields become more attractive.
- In a rising-rate environment: Banks can often benefit, while the “bond proxies” above may struggle.
Right now, with the Bank of Canada and the U.S. Federal Reserve on potentially different paths, understanding these forces is more critical than ever. It impacts not only your sector allocation but also your currency risk if you hold U.S. assets.
The lesson: You don’t have to predict the future. You just have to understand the present and build a resilient, all-weather portfolio that can navigate the inevitable storms.
Your Journey to Financial Resilience
Investing intelligently isn’t about being perfect; it’s about avoiding catastrophic dividend portfolio mistakes. It’s about building a process that protects you from your own emotions and the market’s worst impulses.
These four areas—strategy over hype, tax efficiency, risk analysis, and macro awareness—are the pillars of that process. Master them, and you’ll build a portfolio that is not just profitable, but resilient.
This is a journey, and you don’t have to take it alone. If these lessons resonate with you, I invite you to join my newsletter for monthly insights on how to build lasting wealth, the intelligent way.
Invest intelligently,
Curtis Reker
