I'm told that this is not a bear market; oh?

The Canada Stock Market Index (TSX) reached an all time high of 22,213.07 in April of 2022. Right now, as I write, the TSX is at 18986.60. It is off it high by 3226.47 or 14.5%. This is a correction. It must suffer a dip of 20% or more before a bear market is declared. It is not unreasonable to imagine the TSX dropping to 17770 or even less. But even if it doesn't, this is a nasty pullback.

My portfolio is down a little more than the market. I'm down about 15% and it hurts. Downturns like this are not unexpected but that fact does not soothe the financial pain. The losses may be paper losses but the accent is on losses and not paper.

The worst part of this moment is that I did not see it coming. I thought the market had bottomed and was turning around. I bought some Telus, some TC Energy, some TD Bank and Bank of Montreal. All these recent purchases have lost money. Now, I must guard my remaining cash and dole it out carefully.

On the bright side, thanks to the crashing stock values, the yield on my RIF has grown to 5.85%. With RIFs the government sets the annual mandated withdrawal rate. This is a rate increases with each passing year. For instance, at retirement at 65 the withdrawal rate is 4%. Ten years later, at 75, the rate is 5.82%. My rather high dividend income means I will not have to sell any stock at fire-sale prices to meet the government withdrawal demands. See the withdrawal rate table here: RRIF Minimum Withdrawal.

The value of my stock holdings may be down but I feel confident that my dividend income will not shrink to anywhere near the same extent. For instance, income from the big Canadian banks should be safe. The Bank of Montreal has an impeccable dividend history. It has gone almost two hundred years with nary a dividend reduction. The TD Bank can make almost as remarkable a claim.

Hugo Ste-Marie, a strategist at Scotia Capital, wrote in a report published last Wednesday: "Despite a challenging environment, keep in mind that over the long run, dividends matter a lot, accounting for the lion’s share of equity returns."

To underline that point, the Scotia Capital report broke down the growth of a $100 investment in the Toronto Stock Exchange benchmark from 1956 to today. With dividends, it would have grown to $29,000. Without dividends, it would be only $3,600.

Dividends contributed nearly 90 per cent of total returns over the past seven decades. In other words, it pays to stay invested. Buy and hold pays over time.

Few investors know when a correction or a bear market will appear but both tend to only stay for a short, but painful, visit. The average bear market in Canada lasts just under a year. That said, a two year bear market is not unheard of. Bear markets are difficult to call and far more frequent that most investors believe.

But bear markets tend to be shorter than bull markets and not as frequent as corrections. The average bull market roars along for more than five years and can last much, much longer. A rule of thumb, based on the U.S. market, says a third of time the bear rules and two thirds of the time the bull runs free. Ride out the bear and ride the bull.

For a good take on bear markets, read the linked article from The Motley Fool: What is a Bear Market? In writing this piece, I found the following post very interesting and worth a read: Statistics and facts about the stock market in 2023.

Quebecor (QBR.B) may be a buy

I picked up a little Quebecor (QBR.B) some months ago. It immediately climbed into the black and never looked back until now. Late last week, my QBR.B holdings dropped into the red. By Friday close my Quebecor shares were back in the black but the Quebec-based telecom had my attention.

In an ideal world, I would own a bit more Quebecor than I do. My telecom investments are not as diversified as I would like. For instance, I have more Telus than I am comfortable owning. The excess shares will be sold when the Telus share price recovers. I look forward to the sale. I may invest for dividends but everyone benefits from pocketing some capital gains now and then.

My ideal portfolio has about 350 additional Quebecor shares. At $29.11 I can afford the purchase. The price is good but it could be better. The Morningstar Analyst Report rates QBR.B a four star stock. This means Morningstar believes appreciation beyond a fair risk-ad-
justed return is likely.

And speaking of Morningstar, the respected investment authority believes one should consider holding Quebecor as a core holding in a portfolio based on Canadian stocks. It isn't among the first tier "consider buying recommendations" but it is still listed as a stock worth holding.

The dividend yield of 4.12% is not great but it is adequate. With a payout ratio of 45.14% the dividend should be solid with very little chance of being cut in the near future. The quick ratio of 0.6X also adds to one's confidence in the company.

So, what is holding me back? QBR.B recorded a low of $23.845 in the past year. I worry that QBR.B could drop if the market were to continue to weaken. Am I being greedy? Maybe. (Oh, just to be clear, this post refers to QBR,B. Note the B. It is important.)

Retirement Income Portfolio at end of September

Three months ago, at the end of June, I posted a quickly assembled million dollar retirement portfolio with the goal of realizing an income of $40,000 annually at the outset. 

It was quite a success in its first few weeks but lately it has been losing money at a very fast rate. It is ending the month of Sept. down $32,244.54.

Am I panicked? No. The market is volatile. There are no surprises here. Heck, in a correcting market one would expect to see a loss of $100,000 or more. And if a bear market were to appear, a loss of double that would be reasonable: $200,000.

As I have no reason to sell, the losses are all on paper. On the other hand, the dividend income is real and on October first I will be withdrawing $3,333.33 just as a retired senior would. This will leave more than $2300 towards the November payment.

You might not agree but in my estimation this portfolio is a success. To see the complete portfolio, click this LINK.

A Retirement Portfolio Designed for Dividends

How hard can it be to design a good stock portfolio capable of pumping out four percent in dividend income annually? Back in late June, June 25th to be exact, I did jut that. I designed what I hoped would be a portfolio up to the task and I posted it for all to see. Now, to sit back and see it praised or criticized depending on its performance.

I started my portfolio with an initial one million dollars. From personal experience, I believe this is a reasonable starting value. I will do more work on this in the coming months. If I have to lower the initial value of my example portfolio, I will.

I am withdrawing four percent in the first year: $40,000 annually or $3,333.33 at the start of every month. I made my first withdrawal in August. I let the first month, July, slip by as I wanted to build up a little cash before entering the withdraw stage. I filled the portfolio in June, I did not try to time the market, and so dividends began accumulating immediately.

Today, September 5, 2023, the retirement income portfolio is worth $1,008,083.36 after the withdrawal of $6,666.66 in two months (August and September). At this rate, at the end of 12 months, I will have withdrawn a full four percent in cash and the portfolio will have enjoyed a capital gain of 4.85%. Nice. Will this really come to pass. We will see.

To see the portfolio in its entirety, please click:

My latest crack at a "Retirement Portfolio"

My latest retirement portfolio: an update

In late June I posted a retirement portfolio designed around dividend-paying investments. Now, it is early August. If the portfolio had been real, one might expect that a withdrawal would have been made after its first full month of accumulating dividends. 

I have withdrawn $3,333.33 in cash. Along with the cash, I have withdrawn enough money to buy 100 shares of TC Energy (TRP). The energy stock dipped to $45.84 and this was just too good a bargain to let pass. This increased my dividend income by about $382 annually.

The portfolio balance at market close August 4 was $1,019,836.34. This is down from its high but it is still a very nice number.

REITs: traditional income investments

Office space is in trouble. Since Covid-19, many office workers are working from home. Vacancy rates are up. One has to wonder if REITs are still a good place to stash some of that retirement savings.

I figure the old advice of holding as much as 20% of one's retirement portfolio in REITs may be on the generous side. But holding nothing in REITs may be a little extreme in the other direction. My goal today is to have 10% in REITs in the form of a couple of ETFs. At the moment I am falling a little short of my goal but not by all that much. Always keep in mind that office REITs make up only a faction of the ETF holdings. Apartment REITs are a big component, as well. 

The main REIT ETFs in Canada are all quite similar. That said, I like RIT as my main holding. Unlike the other three REIT ETFs I am going to mention, RIT has some exposure to the U.S. REIT market. This adds a little extra diversity to the RIT holdings.

ZRE and XRE are my next picks after RIT with ZRE getting a the nod. I hold both RIT and ZRE. At the bottom of my list but not that far off the pace is VRE. Why is it at the bottom. Its yield is at the bottom and that fact alone drags it down in my book.

I checked the Morningstar ratings for the four ETFs mentioned and RIT got four stars, ZRE and XRE got three stars and VRE got only two stars. It is always nice when the financial experts at Morningstar appear to agree.

Retirement income portfolio update

On June 25, I created a million dollar retirement portfolio with the goal of providing both monthly income and capital growth. My attempt has done better than I could have ever hoped. It has gained $50,893.30 in less than a month. The bulk of the gain is unrealized but $5503.65 is dividend income. The portfolio records the dividend income the moment the x-date has been reached. In reality, the actual cash payment would follow.

I based my imaginary retirement portfolio on the lessons that I have learned since retiring some 14 years ago. As I don't get a lot of hits, I will leave you to click the link and check out my posted portfolio. If I get a few comments and questions, I will return and complete this post. I will, of course, answer your questions, if any. Until then, have a good day and wishing you good luck with your investing. 

This add was made on December 24th. My imaginary retirement portfolio fell on tough times shortly after it hit $50 thousand plus in gains. It fell tens of thousands in the red. Today, in December, it is up a bit more than $30,000 while it has pumped out $3,333.33 per month in dividend cash to cover living expenses.

Look for an early January post bringing my readers completely up-to-date on how this portfolio is performing. The link below will take you to the original post creating the retirement portfolio.

My latest crack at a retirement portfolio.

I see Telus (T) as a buy today.

I noticed today that Morningstar is rating Telus (T) as a five star buy. I bought: 500 shares.

As a dividend investor, Telus, yielding 5.66% at its present price, is a wonderful stock. A generous dividend with a low chance of being cut by any meaningful amount.

Selling today at a price approaching its low for the year, Telus (T) has lots of headroom. I would not be in the least surprised to see Telus selling for more than $30 sometime in the coming year.

I am stocking up on Telus; I'm buying more than I have as my goal. I plan to sell the excess when the time is right. One must always keep avenues open for generating not just yield but cash for future retirement portfolio purchases.

Telus is one of my core holdings in my retirement income portfolio.

TC Energy (TRP) In my book, today this is a buy.

TC Energy (TRP) is flirting with its low for the past year. Also, it is off its high for the past year by about 25%. This puts the stock well into bear territory. I believe TC Energy is a solid company paying a dividend that a retiree can trust -- a dividend yielding more than 7% today.

Can TRP go deeper into bear territory? Sure. But, I don't see it losing any amount that I would find frightening. It has absorbed some big losses already. I cannot see more of the same happening in the near future.

Moments ago, I put my money where my mouth is; I added to my TRP position. I look forward to my first dividend in a little more than three months. My retirement income has taken a $744 pop with this purchase.

My latest crack at a "Retirement Portfolio"

I have been checking out retirement portfolios posted by financial experts found on the Net. You see, I am an outlier when it comes to most portfolio-building approaches. For instance, I balk at investing any of my retirement money in bond ETFs. And so, I like reading how others approach portfolio building.

I have been wondering how I would invest my savings if I were retiring with a million dollars in savings today. I'd take my inspiration from the Canadian market itself and invest in most, if not all, the market sectors: financial, real estate, utilities, energy, etc.

The result of my weekend musings can be inspected below. I built this million dollar portfolio Saturday. It immediately jumped more than $4000 in value on market open Monday. I'll check this portfolio once a month to see how it is performing.

I have been considering Mullen Group, Algoma Central Corp and the ETF VIDY as additions to my actual retirement portfolio. I'll be watching these three investments and following the perform of each with great interest.

Oh, if you are interested in what percent of the total portfolio each investment represents, just look at the first numbers in the Market Value and round the number up or down to the nearest number that is a multiple of five. For instance ALC is 2.5% of the total portfolio and BMO is 6.0% and BNS is 3.0%. (This corrects an earlier error.)

 

 

I checked my million dollar portfolio in early afternoon. The gain is closing in on nine thousand dollars. Is this confirmation of my approach to portfolio construction? Not necessarily. 

What it does demonstrate is market volatility. Do not overreact to market ups and downs. Always keep in mind that the market is up a full two thirds of the time. In the end, investors with the long range view always come out ahead.

One has to be very careful when reading posts recommending an investment strategy. Stock markets are very volatile. My retirement income portfolio which was thrown together on the weekend was up $17,815.90 at market close just three days later. Someone pushing a certain investment approach can make most approaches appear very good on paper; just choose the right reference dates.

Let's be honest. There may well be a recession coming. It may be mild but it should take the markets down a notch or two. These gains, so quickly amassed, could disappear just as quickly.

But this portfolio will deliver a nice income and most of the dividends are rock solid. This portfolio should get a retiree through tough times with cash to spare.

By market close Friday I was amazed at this mythical portfolio's balance. It was up almost $32,500. Wow!

During the week, I have been adding some of the investments in my mythical portfolio to my actual retirement portfolio. In calculating the number of shares to own, I have been guided by the portfolio percentages used to create this mythical portfoliio.

I am pleased to say that taking my investment inspiration from this mythical portfolio is proving to be a fine move.

To see where this theoretical portfolio was after almost a month, please click the link: 

Retirement income portfolio update

Building a retirement portfolio is easy

When I retired I put my savings into the stock market. I discovered putting together a retirement portfolio in neither difficult nor all that risky. This is a classic buy and hold portfolio that rides out bear markets with grace.

The first stocks I purchased were bank stocks. The Royal is Canada's largest bank. Today it is paying  dividend of $5.28 for a yield of 4%. TD and the Bank of Montreal are two other must-haves when it comes to Canadian banks. TD pays a dividend of $3.84 for a dividend yield of 4.4%. BMO is paying $5.72 for a yield of 4.5%.

• BMO - 4.5% dividend yield
• CM - 6% dividend yield
• RY - 4% dividend yield
• TD - 4.4% dividend yield

One Canadian bank down on its luck is CIBC. Its depressed share price translates into a 6% dividend yield from a dividend of $3.40. Hold these four banks and you have checked off the financial holdings in your portfolio. Note: These Canadian banks are famous for not cutting their dividends. Invest $60,000 divided equally among these four bank stocks and you can count on about $2835 annually in dividend income.

Next, I would turn to the utilities sector and put about 15% of my retirement savings in a mix of Emera, Fortis, Hydro and possibly a little in Alta Gas. I think of Alta Gas as more of a utility than a pipeline.

• Emera - 5.3% dividend yield
  
• Fortis - 4.1% dividend yield
  
• Hydro - 3% dividend yield
• Alta Gas - 6% dividend yield

Put $30,000 into these four utility stocks, 4% in all but Hydro, which get 3%, and you can count on about $1410 annually in dividend income.

Pipelines are another solid investment paying fine dividends. All retirees have money invested in pipelines even if they do not know it. The Canadian Pension Fund, CPP, has a large exposure to pipelines. Buy Enbridge (ENB), TC Energy (TRP) and Pembina (PPL) and you have three good, solid companies. Note the generous dividends. There is a good reason the CPP likes pipelines: the dividends.

• Enbridge - 6.5% dividend yield
• Pembina - 5.7% dividend yield
• TC Energy - 6.6% dividend yield

Put $30,000 divided equally among these three pipeline stocks and you can count on about $1880 annually in dividend income.

This brings us to telecoms. One simply must have exposure to this segment of the market and there are lots of good companies in which to park some retirement money. Think Bell, Cogeco, Quebecor and Telus. 

• Bell - 6% dividend yield
• Cogeco - 4.4% dividend yield
• Quebecor - 3.8% dividend yield
• Telus - 5.2% dividend yield

Divide $40,000 equally among these four telecom stocks and you can count on about $1940 annually in dividend income.

With only a $160,000 invested, our retirement income portfolio is already generating more than $8000 a year. It is a rare retired couple who have not saved at least $160,000 toward their retirement. The present portfolio contains fifteen different companies. This is approaching what many claim is the ideal number of investments for a small portfolio. 

If our retirees have a bit more to invest, it is time to consider putting a little into the American market. It is, after all, the biggest game in the world. A couple of American-based ETFs does not seem unreasonable. I'd put $40,000 into the States with 66% in ZWA, the BMO Covered Call Dow Jones Industrial Average Hedged to Cdn. Funds ETF, and 34% in XUS, the iShares Core S&P 500 Index ETF. (The ZWA is here for the dividend. Seniors need income. If you do not need the income, put more into XUS.)

• XUS - 1.4% dividend yield 
• ZWA - 6% dividend yield

Invest $40,000 divided as detailed in these two ETFs and it should generate about $1775.

Not having anything invested outside North America would be seen by some as a basic error in building a properly diversified portfolio. I am not one of these folk but if you are I would think of adding an ETF like VIDY to the mix. A Vanguard ETF, VIDY has a very low MER and pays a nice dividend of 4.35%.

If I had $25,000 I'd add some VIDY and increase my income by $1085 annually.

• VIDY - 4.35% dividend yield

At this point, I just might call it quits. I could add some health care but the stuff I would buy does not deliver the dividend income I need in retirement. And what do I like in health care? Think TDOC and XHC.

Every portfolio I have ever had contained something that was there just for fun, to provide some excitement. I wouldn't add a lot of the following but I would be comfortable putting $25,000 in my portfolio split evenly between BN, Brookfield Corporation, and BAM, Brookfield Asset Management.

• BAM - 3% (estimated) dividend yield
• BN - 1.4% dividend yield

Brookfield is a fine holding in any portfolio. BAM, a recent spin-off, promises to pay a good, if not great, dividend. BN has a posted dividend yield of 1.4%. My hope is that the Brookfield investment will deliver excellent capital gains along with a fair dividend to pay one for holding the stocks.

There, we are done. A quarter of a million invested and an income of approximately $11,400. That's close to a thousand dollars a month. This portfolio delivers the almost mythical four percent without breaking a sweat. 

If one does not already have a TFSA, tax free savings account, I'd get one. Putting as much of this investment as possible into a TFSA makes a lot of sense. Avoiding some taxes makes a dividend income in retirement go farther.

Risk free comes at a price

If you want a risk free investment, buy a GIC. You may only make 3.5% on a four year term but at maturity all your investment will be returned. Oh, it may have lost buying power if inflation runs at more than 3.5% but you will get all your money back. Guaranteed.

 

If 3.5% is not enough yield, why not take on a little risk and put 2% of your portfolio in IGM stock. IGM is off its recent high by 21.2%. It is selling for $40.71. A price that puts it in bear territory. Buying today, you will enjoy a dividend income of 5.53% for the next four years. That much is pretty much guaranteed. IGM is not overly generous with its dividend. Its payout ratio is quite reasonable. The dividend should be secure.

Morningstar lists IGM on both its Canada Core Pick List and its Canada Income Pick List. Only eight stocks receive this buy recommendation in the recent monthly report. At the moment, Morningstar gives IGM four stars. This means Morningstar believes IGM will most likely reward investors with capital gain.

During the March 2020 bear market, IGM dropped in price to about $21. Clearly, the IGM price can fall a lot more. A paper loss is possible. On the bright side, it climbed out of the depths of the 2020 bear market in little more than a year. If you can afford to hold, its price should recover. (IGM was selling for $43.20 at market close Mar. 7th, 2023.)

My take

I ended up buying some REITs wrapped up in the ETF RIT. I the units were $17.95 with a yield of 4.5%. These units partially replaced the units of XRE that I sold at the beginning of the recent correction. I sold the XRE high and I bought the RIT at a much lower entry price point.

One thing you never get with a GIC is a profit surprise and with a yield of only 3.5% you are hardly being paid to be patient or otherwise.

Make a note to yourself and revisit this advice in four years. See if I was right when I pronounced RIT or even IGM a better investment than a GIC. With a GIC you have almost locked in a guaranteed loss. With RIT or IGM, but especially RIT, I like to think I am risking making a tidy capital gain and banking a generous dividend. That is a risk with which I can live.