Monday, September 28, 2015

The stock market: Get in early, stay in and learn

Those who bought CPD some years ago have never seen a complete recovery.

 I bought my first stock before I was even a teen. Through my life I have been in and out of the market a number of times. When I retired I felt I had a good handle on investing. It may have been a good handle but it wasn't an excellent one. My units of CPD underline the holes in my knowledge.

I knew that the iShares ETF CPD (based on the Canadian Preferred Share Index) could lose value but I really had not contemplated how fast and how far it could drop. Today CPD is at $12.45 and yielding 5.4 percent. I never contemplated losing a quarter of my investment in such a relatively short length of time.

If I had stayed in the market and used that time to learn as much as possible, I might have dodged this loss. I'd like to say there's a bright side to all this, and there is, but I think I should refrain from making any firm pronouncements. It is time to stand back and drink in what has happened and to realize that more unseen problems may yet pop up. Preferred shares are not what they once were. The dividend income from CPD is more fragile than many might believe.

All that said, my CPD pumps out enough money to help me in my retirement. I will continue to hold, continue to enjoy the yield and continue to learn -- to learn stuff I should have learned forty years ago.

Here is a link to an excellent article on preferred shares in Canada: Preferred shares are not as attractive as they seem by Jin Won Choi. I could be in for a rough ride over the next few years.

One good thing, my portfolio is, for the most part, held inside a RIF. As the portfolio value drops, the minimum amount that I must remove also drops. The dividend income has held up much better than the overall portfolio value. This means I am able to live on my retirement portfolio yield while waiting for the eventual return of the bull. My portfolio will recover.

Now, I am finding myself actually rooting for some more stock prices to pullback. I've kept some money on the sidelines and I'd like to pick up some bargains, especially in the utilities sector.

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.
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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.