Some stocks are on sale

Some of the dividend paying stocks that I watch are presently on sale and I think the bargains may get even better in the coming days.

• BCE has a dividend yield of 6.38% and is off its high of the past year by 14.8%.
  
• EMA has a dividend yield of 5.10% and is off its high of the past year by 17.8%.
• ENB has a dividend yield of 7.52% and is off its high of the past year by 18.8%.
• FTS has a dividend yield of 4.05% and is off its high of the past year by 15.2%.
• TRP has a dividend yield of 6.14% and is off its high of the past year by 25%.

Nothing in life is one hundred percent safe. There is always risk. Think Nortel if you need an example to encourage you to set limits on how much you invest in any one equity. That said, I have no problem investing up to five percent of my portfolio in any of the above stocks.

If you invested $10,000 in each of the five stocks, you would reap an annual payment of something in the neighbourhood of $2919 (5.838% averaged dividend yield).

If you still have money to invest, be patient. I'm sure there will be opportunities to buy Telus and a number of the Canadian banks on dips. I insist on a 4% dividend yield. After that, I'm cool. (For instance, Telus today is yielding 4.80%.)

And if investing in a pipeline like Enbridge (ENB) seems wrong to you, you don't know Enbridge. The pipeline giant is building wind farms off the French coast. Enbridge is going green.

https://renewablesnow.com/news/edf-enbridge-and-wpd-ready-to-start-building-450-mw-french-wind-farm-732022/

Useful

https://www.td.com/ca/en/asset-management/resources/graphing-tool/

 

https://einvestingforbeginners.com/lump-sum-calculator-ashul/Lump Sum Calculator: Investing Now vs Later (with Dollar Cost Averaging) 

With each year that passes, the difference between the strategies increases more and more in favor of the lump sum investing style. 

 

 https://www.aaii.com/journal/article/13583-how-much-risk-can-you-handle-and-still-meet-your-goals

How Much Risk Can You Handle and Still Meet Your Goals?

 

Read the not so fine print

Banks are not out to bamboozle you. That said, the English language as used by financial institutions does not always mean what you may think. Growth can mean increased risk and a managed income portfolio fund can be a warning to look carefully. It may be heavily weighted towards bonds.

The above graph shows the growth of two similar investments made in early 2013. The green line represents an investment in the simple, relatively inexpensive fund: TD Monthly Income fund (TDB622). The original investment can be as little as $100.

The purple line shows the growth of the TD Managed Income Portfolio. An investor in this fund had to make a minimum $150,000 initial investment. As can be seen from the above graph the TD Monthly Income fund is up 34% today. The fund that points out that it is managed, aren't most mutual funds in one way or another, and insists on an initial deposit of $150,000, is up only 22% over the same time period. Why? Bonds. The managed fund contains far more bonds. 

The names are similar but these funds are not comparable.

Does this mean one should own TDB622? I think not. I'd look for something that doesn't hold a lot of bonds, something like XEQT. This iShares ETF holds only equities, and it's a good mix of equities with U.S., International and Canadian companies all represented.

 If you insist on holding some bonds, I'd be more inclined to put a small amount in a GIC or even in a cash account where it could await a correction and be available for immediate redeployment back into the market at fire sale prices. 

There are some extremely short term bond ETFs for die hard bond fans. Let me suggest looking at XSQ, the iShares Short Term High Quality Canadian Bond Index. It is yielding 2.19% today. (In the interest of full disclosure, I once owned XBB and was satisfied with its performance. Today XBB is yielding 2.81%. XBB is more volatile than XSQ but it is nowhere near as volatile as equities.

It's still a good time to open a self-directed investment account

GICs are not safe. The amount they earn in interest does not match the rate of inflation. Buy a GIC, keep it for a year and when you cash it it will have lost buying power. This is almost guaranteed.

My answer: accept a bit more risk, open a self-directed portfolio account and invest with care. All the big North American markets are at all time highs. A correction is likely. At the very least, a pullback from the recent highs is likely.

My answer, buy enough good, dividend-paying investments to get you by and keep the balance of your money in a money market account paying .25% daily interest. This is the same rate as paid by a 1 year term GIC!

I'm tracking a demo portfolio to show a friend exactly what I mean. They can show this post to the bank at their next meeting.

Total amount of money to invest: $60,000.

• Invest $25,000 immediately. Do not try to time the market. I have the following in my demo account:
• 46 shares of Canadian Imperial Bank of Commerce (a bank)
  
• 192 shares of Emera Inc. (a utility)
• 88 shares of Enbridge Inc. (a pipeline)
• 252 units of  iShares Core Growth ETF Portfolio
• The balance, $35,000, is in the money market account TDB8150 paying daily interest of .25%
  

• This portfolio delivers 2.09% annual dividend income calculated on the original $60,000 investment.
• This dividend income amounts to $1255.96 annually.
  

Even in a severe bear market, I expect this self-directed account to retain more than 85% of its value. And in a bear market is the best time to get into the market, one can immediately invest the balance. The cash is not tied up, out of reach, in a GIC. (In reality, I'd invest half the balance and then invest the other half when I felt confident that I knew where the market was heading: rebounding or testing new lows. I'd be hoping for another drop. I like stocks that are not only on sale but ones that carry Further Reduced red tags.)

When the market rebounds out of correction territory, I'd sell a little, converting a minimum of 5% into cash which I would put in a money market account. 

And how is my demo account doing? I'm in the black and I'm collecting dividends. If this demo was the real deal, I'd be happy.