Enbridge looks like a buy, at least to me.

My Enbridge dance card is full. I like putting a ceiling on how much I own of any one stock. I think of this as risk management through diversification. But, if you don't have a lot of Enbridge eggs in your basket, today might be a good time to consider some increased exposure to the Canadian pipeline operator.

Enbridge was in the news last month when it announced the proposed purchase of three utilities from Dominion Energy (D.N) for $14 billion including debt, creating North America's largest natural gas provider and doubling its gas distribution business.

The deal is for East Ohio Gas, Questar Gas, and Public Service Co of North Carolina and will consist of $9.4 billion in cash and $4.6 billion of assumed debt.

Enbridge is branching out. It is no longer simply a pipeline provider. Previously it was in the news for the windmill farms it is constructing in the Atlantic Ocean off the coast of France. Clearly, Enbridge wants to be a company with a future and it is ensuring that future today.

At $43.34, the stock price at this moment shouts "Buy me!" and folk acquiring the stock will enjoy a dividend of 8.233% as they wait for the capital appreciation to kick-in.

If I didn't own as much as I do, I would be a buyer. Who knows, I may yet yield to temptation and add just a little to my holdings. It is hard to resist.

If analysts are right, the future is bright. A big "if".

I am surprised by my losses. Oh, I saw some of the losses coming but I was blind-sided by others such as Telus. I had great faith in Telus. Very foolish. Never put too much faith in any stock. Stocks are fickle. Stocks are famous for constantly going up and then down and surprising us with both moves. It is the reason why many folk steer clear of the stock market. 

If you are like me and have recently suffered massive paper losses and are realizing that these losses could double before the market turns around, you need some cheering up. I found a bright light shining in the dark shadow of the falling market - the analysts featured on TD WebBroker.

Take Quebecor. Its high for the past year was $35.61. Today it is at $28.25. If you check the Analysts page for the stock, you will find the analysts see an upside price of $39.33. There is one fly in the ointment; analysts are known to be wrong a lot of the time. Few are right even 70% of the time. Flipping a coin is often as good an indicator of future stock prices as the musings of a professional analyst. Sadly, three of the seven analysts were not even able to best a flipped coin.

But, hope burns eternal. My portfolio doesn't need the 38% upside the TD WebBroker-picked analysts see for Quebecor, nor does my portfolio need the 37% forecast for Telus. A 15% gain will be more than adequate. Such a modest dream may well be fulfilled.

One final caveat when it comes to analysts. As a group, their forecasts are as volatile as the stocks they follow. One day a stock will be forecast to hit $60 but a month later the same analyst may see the stock only reaching $50. To err is to be an analyst.

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.

Why do I invest in the market?

With the market looking as if it could lose another one percent in value today, it is a good time to examine why I invest. It is not complicated. One, I need income to live in retirement and two I would like my personal worth to increase in value over time.

To illustrate what happens to a retirement portfolio over time, I created and posted a portfolio based on my investment beliefs. In the few months it has existed, it has lost almost $22,500. Ouch!

That my seem like a lot, and it is, the loss is not the whole story. At one time, this portfolio was up a little more than $50,000. That means one could argue that this portfolio is down about $75,000 from its recent highs. Looked at like this, it kinda takes your breath away, right?

On the other hand, we are taking a full four percent out of this fund annually in twelve monthly payments of $3,333.33. So, even though the portfolio may be shrinking in value, it is still able to meet the demands for monthly cash payments. In the real world a portfolio like the one posted would have only lost value on paper. Paper losses have a way of disappearing over time.

So, the example of a retirement portfolio posted in late June is meeting one of my two goals. It is delivering monthly income. As for delivering capital gain, the voting is still out. As the market tends to grow more than it shrinks, it grows approximately 65-70% of the time, if we continue to hold, eventually we should come out on top. This period of racking up loses should come to an end shortly.

Stay tuned to see how this unfolds.

Retirement Portfolio Dips Into Red

How easy is it to generate a steady income from a fully-investment retirement portfolio? Well, if you follow this blog, soon we will both know as I have posted my own take at creating such a portfolio.

It has been a bumpy ride. I was up more than $50,000 at one point but I have an updated balance this week which is slightly in the red. Ouch! But, it is not as bad as it looks. I believe I will be able to withdraw a full $3,333.33 at the beginning of this and every month, emulating the withdrawals that must be made in retirement.

So, how much am I down? Approximately $10,000 or one percent. This is hardly worth concern. Come back in a week to get updated. The portfolio might be in the black by then. One can only hope. Cheers!

My retirement portfolio is holding in there

It is halfway through September and the portfolio I posted showing how easy it is to design a successful retirement portfolio was up $17,889.73 at the close.

I should note that I removed $3,333.33 at the first of September. If this were an actual income portfolio in its first year, it would have had to stand up to the stress of having four percent of its value deducted spread out over 12 monthly withdrawals.

Click on My latest crack at a "Retirement Portfolio" to see the entire portfolio. Come back at the end of the month for an update.

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"

Retirement portfolio monthly payment coming Tuesday

One can find literally dozens of investment suggestions on the Internet. Many of these are from very fine sources. Many of these I have followed. I found that many of these posts shared a lot when it came to the investment advice offered. I decided I might be able to do as well as the legion of online experts I was following.

I designed a million dollar portfolio for a retiring senior and immediately put my ideas into action. Why immediately? Because one should not try to time the market, right?

Come back this Tuesday and I will reveal how my imaginary portfolio is performing. I have withdrawn one monthly payment of $3333 already and come Tuesday I will remove a second monthly payment of $3333.

See you Tuesday. Have a good holiday weekend. Cheers!

Another reason for investing in dividend-paying stocks

TD WebBroker has a page called Market News. I like to check it every morning. Today, I found the following:

"Dividend stocks are a better investment than income properties": BMO economist

Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

Continuing a theme from earlier this month, BMO senior economist Robert Kavcic compares the yield from fixed income and dividend stocks to an income property,

“The economics of real estate investment get tough on a relative basis given that investors can secure a better yield in dividend stocks, or sit tight in risk-free cash/government bonds. The comparison to dividend stocks is an especially interesting one because both offer long-term capital appreciation potential, and both will see their payouts grow over time at least in-line with inflation. But, dividend investors also benefit from a much lower tax burden; they have access to instant and partial liquidity; and face minimal transaction costs. At the same time, payout risk is generally low compared to rental laws that are tilted heavily in favour of the tenant, along with inefficient backlogs at the Landlord and Tenant Board. Real estate investment should command a risk premium (which it historically has), but current pricing does not offer one” "

I am reposted the above because I am a dividend investor. Many folk see problems with dividend investing and in some cases I agree with them and their criticisms. But I am an older, retired gentleman. In my position, dividends are far more important than they were some decades ago. The steady and increasing income flow keeps the financial wolf from my door. 

I feel somewhat vindicated after reading the Scott Barlow post.

How much is the market down? Is it correcting?

Lately, under the belief that the market is well off it highs, I have been a buyer. It has not been working out well for me. Each of my picks has declined in value and my losses are mounting. Right now the TSX is at 19,868.79. My gut tells me this is a fair drop but when I check the posted high of the past year, 20,843.21, I find the TSX is only off its high of the past year by about 4.7%. Clearly, the TSX today has a lot of room to drop.

The present market enters bear territory when it drops to 16,674.57 for a loss of 20%. A correction begins when the market drops 10% or drops to 18,758.89.

Why did my gut tell me the market was nearing correction territory? Well, the market peaked less that a year and a half ago at 22,087.20, on March 29, 2022, to be exact. Today the market is down about 10% from that historic high but that is not the high used to calculate the present market loss.

I can live on my dividend income. I think I will try and resist the urge to buy more. I am going to try and hold out for some real bargains. If the bargains never materialize, no problem. TDB8150 is paying 4.55% interest on cash deposits.

Catching the falling knife

When the Bank of Montreal got down into the $118 range late last week, I saw a buying opportunity. But, I didn't buy. I held out in the hope that I could buy at a price low enough to give a yield of at least five percent.

Monday the price of Bank of Montreal stock wobbled about but, in the end, it was a down day and I bought in at $117.60. My yield was five percent right on the nose.

The Bank of Montreal is one of the Canada's largest banks. It has been paying dividends for going on two hundred years. It has gone almost two complete centuries without cutting its dividend. Buying Bank of Montreal stock for its dividend seems a very safe purchase. The dividend is almost guaranteed. Sadly, the stock price is not.

I only bought a hundred shares as I already had a nice amount of BMO shares in my portfolio. My income jumped $588 annually but I have also lost about $177 on paper thanks to the loss in value of the stock and the loss may well grow. The amount of the drop was not unexpected but the speed was.

I would not be surprised to see Bank of Montreal drop even more. It may even set a new low for the past year. If it does, I am buying another one hundred shares. Until then, I am going to sit quietly, watch from the sidelines and lick my stock-purchase wounds. The five percent yield will help me recover.

Passing time can hide true magnitude of a stock loss

Using a spreadsheet to track my investments has made me aware of what I see as an interesting blip in the math used to calculate a bear market. A stock enters bear market territory when it is off its recent high by 20% or more. The important word in that definition is "recent".

Take Bank of Montreal (BMO) stock. Today it is selling for $118.87 (mid-day) and is off its high of the past year by 13.6%. BMO is in correction territory. It is not now in bear market territory but it was and not all that long ago. Passing time and not a big pop in price pulled BMO stock out of the bear's grasp.

On March 22 of 2022 BMO hit a high of $154.47. Today BMO is trading at $118.87. It is off that historic high by $35.60 or 23.0%. But that high was about 17 month ago. It dropped off the financial radar when it passed the 12 month mark as it is the high of the past past year, $137.64, that is used to calculate corrections and bear market prices. Today BMO is only down 13.6% when calculated using its high of the past year. BMO is said to be barely in correction territory.

Investors who bought a hundred shares of BMO some17 months ago have lost $3560. The present target price of BMO shares is around $135. This means that even at its target price for the coming year, an investor who bought the stock at its historic high would still be down about $1947. It could be two or three years before such an investor is in the black on this investment.

What can we learn from this story of investor loss? My big take away it that investors must pay attention to not only the loss calculated using the high of the past year but must look back even further to the highs of recent years.

My spreadsheet indicates that the recent market losses may be worse than folks realize. For instance, BMO was off a recent high by about 27.5% at one point. It can easily take more than two years to recover from such a large drop. The fact that BMO stock has not yet fully is not surprising.

It also seems clear to me that the above is a clear argument for averaging down. An investor who bought 100 shares of BMO at its historic high invested $1,548. When the stock was clearly in bear territory, say selling for 22% less, it would have been understandable if the the investor averaged down at that point and bought another 100 shares at $120.49. 

With BMO shares trading today at only $118.87, BMO is a clear buy for our investor who got badly burned buying at the historic high. Averaging down today would drop his average price for BMO to $136.67 and give him a nice dividend to enjoy while waiting for the BMO price recovery.

If BMO shares should take another dip, I believe I might well be a buyer. (Note: BMO hit $17.60 on the next trading day. I bought 100 shares yielding 5%.)

For a good article on bear market recoveries, read: Bear Market Fears: Here's When Stocks Usually Bounce Back After a Downturn.

Telus: I am not alone seeing a buy

Today it is being reported that . . .

Yesterday, Telus dropped below $23. I got a few shares for $22.88. Telus is the second largest telecom in Canada. I agree with those who see today's messy Telus story as temporary. With a 6.3% dividend, Telus pays an investor to buy and be patient.

I consider Telus a core holding in my retirement portfolio. It doesn't just pay me to hold and be patient. It helps pay my expenses in retirement. 

Here is a link to one of my previous posts looking at Telus: Telus: still a buy today.

TC Energy: If you held it, hold it; if you didn't hold it, buy it.

TC Energy Corp. (TRP) is down some 30 per cent over the past 14 months. It has been one bit of disconcerting news after another jarring announcement following close behind. The financial pain inflicted on stock holders has been almost constant for more than a year.

I've said it before, and I was wrong, but I'm going to say it again, and this time I think I may be right. The worst is over! The shock of President Biden's cancellation of the Keystone XL pipeline project is fading and the cost overruns of the Coastal GasLink pipeline in British Columbia are beginning to seem manageable. 

As the dust settles from the sale of a 40% interest in its U.S. Columbia gas pipeline system the positive aspects of the sale are becoming clear. Also it was announced around the same time that TC Energy was spinning off its oil pipeline business in order to accent its core natural-gas operations. This news was unexpected and the market doesn't like surprises and let that fact be known.

The dividend today is 7.71%. This is big enough to attract investor interest even in the present rising interest rate environment. TC Energy is a classic pays-investors-to-hold play. Heck, one can get rich while waiting out the present pullback in stock price to end.

The yield paid by TC Energy may be exceedingly high but the annual $3.72 dividend appears to be not only safe but, going by the company's own projections, the dividend may grow from three to five percent annually into 2026. The TC Energy stock may have lost value but it is not the only pipeline business to be hurting at this time. Think Pembina or Enbridge. They, too, are well off their highs.

There are lots of signs that the pessimism surrounding TC Energy, and the other pipeline operators, is overdone. If you bought high and now have ridden out the worst of this economic storm, it may soon be time to be rewarded for your patience. I'm in that boat and I'm continuing to hold.

If you recently bought some TC Energy, you may have already realized a small but nice profit. I am in that boat as well. I have been both a buyer and a holder of TRP and I take joy from being in both camps. I see a tidy profit in the coming months from holding TRP. I would not be surprised to see it hit $55 or even $60 or more in the coming years.

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.