Canada Recession Is Here | Dividend Stocks Will Crash

追加: 2026-05-30

[00:00:00]today folks. VDY till I [ __ ] die. Even though I believe this [ __ ] is coming down and that's not going to stop me from buying it. I'm not selling it. But you got to recognize after an entire year vertical lines across the markets, especially the Canadian markets, outperforming almost every other international market out there, up 41%, it was up 50% just with the dividend within a year. And now we're kind of pulling back. I mean, we're down a couple percentage points.

[00:00:23]And I'm suspecting that this is likely going to continue. And I'm not trying to fearonger you out of the market. I don't want this to tour you from investing in any way, but but there's a lot of red flags I want to talk about, especially considering Canada is slipping into a technical recession. We've had two straight quarters now of negative GDP, which isn't supposed to happen. It just shows you how dumb analysts are because, uh, if you read into this, uh, basically heading into Friday's release, the consensus among e economists had called for real gross domestic product growth of 1.5%. And I'll remind you just an odd year and a bit ago during the tariff war the Bank of Canada was saying we could see irreparable irreparable if I'm saying that word right just damages from that tariff war that would you know hinder the economy permanently and it's just funny watching how wrong economist and and even the head of the bank of Canada just Tiff Mlin is just wrong wrong it is just absolutely hilarious but me as a individual investor here I can just look at things and you can kind of get a general sense of what's going on here that's what I'm going to try and share with you today my name is Kyle I'm a Canadian millionaire documenting his path to financial independence to perhaps one day retire early. Only asking you join me in return you hit that subscribe button. Thanks to everyone that buys my portfolio tracker books 101's at kyloson.com link in the description. You guys are legends for supporting the channel. We'll talk about the portfolio in a moment, but I really want to zoom in on VDY specifically and just kind of give you a sense of my concerns here. And again, this is a long-term buy and hold asset for me. I don't really care if it oscillates because who would have ever suspected it would be up this much anyways. But there's basically a good this is a good valued ETF if you look at it at face value, right? Like a 16 PE, a 13% uh earnings growth rate. Like this is very reasonable comparable to like what you're seeing perhaps in some of the hyper tech companies that trade at much higher values versus growth rates. This is very nice. But the reality is the underlying growth rates are going to start stalling out or very likely coming down. And if the earnings like so basically these stocks don't flatline for the next couple quarters and allow earnings to bring down the the PE multiple, what's going to happen is if the PE stay elevated in earnings start to drop, we'll see the stocks drop probably significantly, right? They'll go into a correctional period. And if you look at what I'm paying attention to specifically is the banks. The banks and energy make up the vast majority of this ETF. Like Pokemon cards, you got to collect them all. And now that bank earnings happened this week, I want to share with you some of the red flags that I'm personally seeing. And when it comes to the energy and commodity cycle we've been through, it's been a perfect storm for the Canadian economy. We went from higher interest rates coming out of a a tariff war that didn't hinder the economy. We haven't seen a mortgage collapse. So, the higher interest rate environment has been boating better for margins for the bank and they're putting less loan loss provisions aside, which we'll see. All of that has sent those things to the bloody moon over the last year, record highs. Then we had uh the precious metal boom caused by central banks in China just bolstering the reserves trying to back the yuan apparently with gold and that has bolstered the entire precious metal market which is one of the largest sectors in Canada and then we have the geopolitical event which really drove up the oil prices that's just happened in April more recently right but this we know are are cyclical they're short-lived they're they're you know caused by specific black swan events and over time they typically correct and come back to the downside. So oil stocks, guys, can only take advantage of this for so long. Gold has been the primary indicator to the entire precious metal boom, and this is now kind of consolidated, and we're hoping it stays here. If if prices can stay where they're at with the precious metal market, that'll elevate and keep things a bit better moving forward for earnings. But if this drops down to like 3,000, if we actually see like a massive correction in gold by like, you know, coming back down to a more nominal like $3,500, $4,000 price target, we're going to see a big sink in the Canadian economy that way. But more importantly again, let's talk about the two big banks that make up 20 25% of all of VDY.

[00:04:02]They're the two big bets you're making when you're buying VDY, which is Royal Bank and Toronto Dominion Bank. Royal Bank is one of my favorite companies in the world. It is one of the most resilient banks. It has rode through every recession, 2008 global crisis and has come out better on the other side every single time. But again, I just think this vertical line here is driven by just a peculiar event that's petering to its end here because we saw 25% year-over-year uh growth in the net income. Uh but if you look, it was down 5% quarter over quarter. And that quarter overquarter number is going to matter here in a second. And I don't like that these banks have been during this vertical line market buying back shares. Like they bought back 1.7 billion in shares, did 2.3 billion in common share dividends. I'd rather them just increase the overall dividends. you know, they got more than enough margin of safety here for the payout ratios that have dropped a lot of them below 50%. They can easily increase the dividends a lot more, and they have.

[00:04:53]They increased them 7% uh for this uh you know, last earnings report, which is great. Um but why buy shares back when you know the the your earnings are elevated because quarter over quarter they're leveling off now. Like we're starting to see finally this because quarter over quarter they were just growing into infinity, but now they're starting to peter off. So, we're still seeing year-over-year growth, but if you look at the quarter over quarter, they're down about 4 500 million. And something tells me the next quarter will be roughly the same. We'll be leveling off here as we finally catch up to the the, you know, the margin uh expansion that happened because the interest rates are still high, but because we're not defaulting on anything, loan loss provisions have come down and that's what's driving the net income growth, right? So, net income is up significantly year-over-year. And look at the delinquencies here for Royal Bank specifically. It's probably one of the strongest banks in the world. And if you look at this last quarter they posted, actually the delinquencies have dropped off across all of their segments. Uh residential mortgages, helocks, other lending, credit cards, everything has actually come down slightly. That's great sign. That is an incredible sign to see, right? But we have to recognize that the net income growth, these double digits probably slowly starting to come to an end. And I talked to Gemini and used AI and they said the same thing. by the third to fourth quarter of this year will have caught up to the whole margin expansion and we won't be seeing the same level of growth moving forward which again means either the price to earnings have to come down or the stock has to level off and let the earnings catch up to bring us back down to a more nominal PE for the future growth ahead of us right so if you look at something like TD as an example here again this is probably one of the more favorably valued banks but it's not growing the same right they've been dealing with asset problems because of moneyaundering in the United States they had asset freezes and they're not seeing nearly the level of growth of these other banks, they did have a oneoff uh, you know, revenue growth rate from, you know, moving assets around and selling assets and whatever they were doing. But if we look for the last two quarters, the revenue has actually been down. Uh, but again, provisions for credit losses have also come down quite significantly.

[00:06:47]So net income here is doing okay. I'm surprised her net income was 4.2 billion. It was up uh, you know, quarter over quarter. So that's a good sign to see. But again, when revenue growth starts to stall out, you can only do so much with the bottom line. And when you don't have revenue growth, the bottom line is going to slow you down a little bit after a while. And what's neat is and what I was most impressed by was Bank of Nova Scotia, to be honest, of all the banks, uh, Bank of Nova Scotia, I think, justified their earnings the most because I mean, their total revenues were up quite significantly year-over-year and quarter over-arter.

[00:07:18]So, they're still in this nice growth phase, uh, which was quite surprising, and their net income up was up quite significantly. Uh comparably, CIBC is getting a little flack because I think they're liquidating part of their uh Caribbean assets. I'm not sure why they're doing that. I haven't looked too deeply into it, but the revenue uh was quite resilient. Again, down quarter over quarter, but up significantly year-over-year. Uh and again, net income did just fine here. Nothing too crazy, but again, a little bit, I think, disappointing for a lot of investors because it was down uh I think uh pretty significantly quarter over-arter. Uh if you take a look here from 2.6 uh billion to 2.4, for, but again up year-over-year regardless. Again, like Pokemon cards, you collect them all. The ones that continue to perform make up for the ones that don't. But we really rely on on Royal Bank and TD uh for the likes of VDY. But again, they're great assets to hold. I'm just a little skeptical on where we go from here. So again, take it with a grain of salt when you've watched an ETF that literally had no real equity growth for well over a decade. I mean, it was basically flat from an equity standpoint and now all of a sudden just vertical line. So, just again take that with a grain of salt. I think I didn't touch on Beimo. We talked about National Bank uh the other day, but yeah, when I'm looking through these guys, they they roughly all have the same results.

[00:08:30]We're seeing a slowdown um basically in kind of revenue growth on a quarter- basis. So, I think it's finally at that petering end of the cycle. And if oil comes down and commodities start to level off, guys, again, just take what comes moving forward with a grain of salt, especially if you're getting into VDY today. And just remind yourself you're buying this for the next 30 or 40 years of your life. And you're going to keep cost averaging regardless across the rest of my assets. I'm going to talk about it more maybe on the weekend.

[00:08:57]Maybe we'll do a live stream. Who knows?

[00:08:58]We'll see how I feel. uh because I really just want to talk about what's going on in the markets, especially the volatility in the space industry after just talking about it yesterday getting a bit of a correction with Blue Origin's rocket that blew up and I'm just just really concerned um with a lot of the action I'm seeing and I think a lot of the future growth isn't going to come necessarily as much from the global markets as they are the US markets. I don't think the US markets are necessarily overvalued. Again, you could secularly talk about the private markets coming public, open AI and SpaceX being bubbles. You can talk about Nvidia and the chip sector having a certain lifespan once capex starts to level off.

[00:09:32]Sure. But when I look at the bottom line earnings and fundamentals of Google and and meta, Microsoft and Amazon and some of the other upper weightings in VO like I still think that's where a lot of the future potential is coming from. I mean take interactive I still think is trading at great values. So I think I have a nice diversity again because the Canadian markets were making up for the lackluster growth in the US markets. But I think cycllically these things will rotate back and forth depending on where people see value in the markets. So I'm just happy here just kind of watching things oscillate. Again, now we're seeing Google pull back, but Microsoft is going up. Take two. It came down pretty significantly after its earnings.

[00:10:06]It's up nicely today. So again, it's just this is why you want that that nice diversity between different sectors because again, they'll kind of come in and out of favor and they'll benefit your overall portfolio, which is why even with the volatility in the markets, my accounts are still sitting at all-time highs of around 680K, which is uh quite impressive to say the least.

[00:10:24]But I'll pass the question off to you.

[00:10:25]I'd love to know what you think in that comment section below.