The pushmi-pullu stock market

Do you recall Dr. Doolittle's pushmi-pullu (pronounced push me-pull you)? The stock market is a bit of a pushmi-pullu creation but a mix of a bull and a bear rather than than a couple of llamas. 

The bull end of our creation has been leading the way for the past few years. But the bull has finally run out of steam and the bear now has control.

Bear markets are not a surprise. Bear markets are simply part of our investing universe. Some call bear markets rare. I'd rather say they are not as common as bull markets but they do appear with a certain regularity.

Historically, bear markets do not last as long as bull markets but psychologically they seem to carry more clout. For this reason, many people are tempted to get out of the market during a serious downturn. This is usually a mistake locking in losses.

No one knows when market sentiment will flip from bear to bull. When it does flip, it is usually quick. If you are out of the market, you may miss some of the biggest gains as the recovery kicks in. 

I get through bear markets by focusing on the benefits of being invested during both bull and bear markets: dividends. Today Enbridge is yielding 6.7% and the yield promises to go even higher over the coming days and weeks (assuming the bear market continues to gain strength.)

The TD bank is yielding 4.1%, while the CIBC yielding 5.2%. If one likes REITs, the ETF RIF is yielding 4.9% today. Telus is yielding almost as much at 4.8%. Emera, a much loved utility, is at 4.6%. I may be getting greedy but I think this bear has some still untapped strength. Stay the course and one my well be rewarded with some truly generous dividends and then some solid capital gains as stocks slowly regain their former values. 

The Morningstar star system reflects how a stock's price today compares to its fair market value as calculated by Morningstar. The more stars the more attractive the price. With the market collapsing, more and more stocks followed by Morningstar are getting into four and even five star territory.

Stocks I'm watching today

There are a number of stocks and ETFs that I follow rather closely. If the price drops my interest grows. If it drops enough, usually something in excess of ten percent off it high of the past year, I buy a little. 

If it drops another ten percent I consider buying more but at this point I have some exposure and I don't feel the same pressure to buy. If it surprises everyone and stops dropping and starts climbing, I am already on for the ride. If I can muster the strength to resist, I try and put off a purchase until it has dropped 20% or more since my initial purchase. At this point, the pull to add to my holdings is almost impossible to resist.

BAM.A: Brookfield Asset Management-A LV (BAM.A is down about 23.73% from its high of the past year.)

BMO: Bank of Montreal (BMO is down about 17.45% from its high of the past year.)

CM: Canadian Imperial Bank of Commerce (CM is down about 19.61% from its high of the past year.)

RIF: CI Canadian REIT ETF (RIF is down about 17.45% from its high of the past year.)

MFC: Manulife Financial Corp (MFC is down about 18.87% from its high of the past year.)

QBR.B: Quebecor Inc CL-B SV (BMO is down about 19.11% from its high of the past year.)

QSR: Restaurant Brands International (QSR on TSX is down about 25.03% from its high of the past year.)

TD: Toronto Dominion Bank (TD is down about 16.01% from its high of the past year.)

XUS: iShares Core S&P 500 Index ETF (XUS is down about 18.92% from its high of the past year.)

ZRE: BMO Equal Weight REIT Index ETF (ZRE is down about 16.84% from its high of the past year.)

Except for BAM.A, all these stocks deliver a generous dividend. As a retiree, dividends, generous dividends, are very important to me. The large Canadian banks are wonderful stocks to have in a retirement portfolio as these banks, other than National Bank, have a history of never cutting or reducing their dividend. Bank dividends promise solid income. TD is yielding 4.93% at today's close.

The two REIT ETFs are also fine places to park retirement investment funds. I am betting that these ETFs will not cut their dividend payment by more than 15% no matter how poor the economy. I could be wrong, I'm human, I make errors, but in this case I feel quite confident that I am right.