Friday, September 11, 2015

Another kick at the can

The market is continuing to soften. It has become what I begrudgingly must admit is a bear market. This is bad for the stuff I own but it means I am now looking for buying opportunities. I'm attracted to three companies in the utility sector:

Brookfield Renewable Energy Partners L.P. (BEP.UN)
Emera Incorporated (EMA)
Fortis Inc. (FTS)

The utilities sector is under pressure because of its sensitivity to rising interest rates. Rates have not risen, yet, but the market seems to be factoring in some of the damage early. When rates do eventually rise, the sector may drop even more.

I have looked at XUT, the iShares ETF giving an investor some exposure to the utilities sector, but I figure I can do just as well, if not better, buying the three big names listed. My plan is to weight my purchase toward Fortis with Emera next and Brookfield bringing up the rear. This will be a long term hold which will pay a nice dividend which should increase with the passing of time. I see this mix as better than simply buying an annuity.

I'm keeping my powder dry, waiting and watching.

I heard from an friend who has been building his portfolio for years. He agreed with my choice of utilities but called to tell me to add Canadian Utilities Ltd (CU). I had considered CU but left it off because the dividend didn't reach four percent. He knew without asking why CU was not on my list.

I listened to his argument and I was swayed. I'm adding CU to my list of utility stocks to own. My exposure to CU will be similar that of BEP.UN. And he had a caveat concerning BEP.UN. If I were to insist on buying only three stocks, he would remove BEP.UN before CU.

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