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My latest crack at a "Retirement Portfolio"

Monday, April 22, 2024

Honest, Dr. Graham Brockley, I am not a "bot".

Recently I found an interesting Facebook page devoted to dividend investing: Canadian Dividend Investing. I'd post a link but because of a complaint, I believe, from Dr. Graham Brockley, of Ladysmith Urgent Care in British Columbia, I have been blocked. Why? I think it's because he thinks I am a "bot".

The good doctor is interested in the Frugal Dividend Portfolio created by Norman Rothery and carried by the Globe and Mail. I'm familiar with this portfolio as TD WebBroker reposts it in its News section. The portfolio is the result of a unique screening process devised by Rothery. I gather Dr. Brockley would like to emulate the Rothery screening system. I cannot say for certain as the doctor shut-down our conversation after accusing me of being a "bot".

I liked the direction the doctor was going. I decides to continue my investigation without him. The first thing we must know is how does Rothery structure his screening process? I turned to Andi. Andi is an Ai powered search engine. Andi told me:

 

Norman Rothery constructs his Frugal Dividend portfolio using a multi-step process that focuses on large, stable dividend-paying stocks trading at low valuations.

The process begins with the 300 largest stocks on the Toronto Stock Exchange (TSX) by market capitalization. It then narrows in on the roughly 200 stocks that pay dividends.

From there, it selects the 50 dividend stocks with the lowest volatility over the prior 260 days.

Finally, it picks the 10 stocks with the lowest positive price-to-earnings (P/E) ratios from those 50 low-volatility dividend payers.

The portfolio is typically re-balanced monthly or quarterly. When re-balanced monthly, it has historically replaced about two stocks per month on average.

Rothery's Frugal Dividend approach aims to build a concentrated portfolio of undervalued, stable dividend stocks to deliver market-beating returns over the long run. However, investors should be prepared for volatility.

 

Has his approach worked? Amazingly well if the Ai search engine Andi is correct. According to Andi backtesting has shown the Frugal Dividend portfolio gained an impressive 17.4% annually from 1995-2022, assuming monthly rebalancing. Even with just annual rebalancing, it returned 16.9% per year on average over that period.

A caveat, be aware that while the portfolio has generated strong long-term returns, it can still decline significantly during market downturns. For example, it fell 35% in the 2008 financial crisis and 28% during the 2020 COVID-19 crash.

As of March 2023, the Frugal Dividend portfolio had a median dividend yield of 4.4% and median earnings yield of 12.5%. The latest version of the Frugal Dividend Porfolio that I could find is posted below.



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Norman Rothery, PhD, CFA, is the founder of StingyInvestor.com. His ideas on investing are published regularly in the Globe and Mail and reposted by TD WebBroker in their News section. Rothery is a man worth following.

If, like the good doctor who inspired this post, you would like to do your own screening for the the perfect income portfolio, there are a number of screening programs available online. Sadly, many only allow limited access to the screening tool unless a payment, often monthly or annually, is made.

Screens available on the Internet

  • Stock Rover - Best for fundamental investors, offering robust screening and research features to help investors make informed decisions and find undervalued stocks. According to the information I found, Stock Rover offers the following pricing plans:
  • Free Plan: Completely free
  • Essentials Plan: $7.99/month or $79.99/year or $139.99/2 years
  • Premium Plan: $17.99/month or $179.99/year or $319.99/2 years
  • Premium Plus Plan: $27.99/month or $279.99/year or $479.99/2 years

The search results also mention that Research Reports can be bundled with any yearly or 2-year Stock Rover plan for $49.99/year, otherwise they cost $99.99/year.

  • Trade Ideas - Best for technical traders, with its AI-powered stock screener "Holly" that uses machine learning to provide stock recommendations. 10 day test period. According to the search results, the cost of using Trade Ideas depends on the subscription plan: Trade Ideas offers both free and paid subscription plans. 
  • The free plan provides access to basic stock scanning and screening tools. 
  • The paid Premium subscription plan offers more advanced features like backtesting, auto-trading, and access to the AI trading assistant "Holly". 
  • The specific pricing details for the Trade Ideas Premium subscription are not provided in the search results. However, it is mentioned that the Premium plan is designed for active, short-term traders and provides access to institutional-grade trading tool.
  • Finviz - Best free stock screener, with a user-friendly interface and the ability to filter stocks based on various fundamental and technical criteria.  
  • StocksToTrade - Best overall low float stock screener, with a highly customizable desktop app and an algorithm-based chart analysis tool called Oracle. 
  • StockFetcher - Best customizable low float stock screener, allowing users to code their own complex filters using a coding-like language.
  • ChartMill - Most versatile stock screener for low float stocks, offering a combination of technical and fundamental parameters. 
  • Yahoo Finance - Offers a free and advanced stock screener with a wide variety of filters, including the ability to screen for sustainable ESG stocks. 
  • TradingView - Has a user-friendly stock screener interface, and also offers forex and cryptocurrency screeners.
  • StockFetcher - Supports over 125 indicators to build unique stock filters, though the interface may be overwhelming for beginners.
  • Fidelity - Brokers often provide their own free stock screeners, which may be a good option if you already have an account with them.

Friday, April 19, 2024

Stock Unlock: worth a look

Here is what Perplexity had to say about Stock Unlock.

Stock Unlock is an investment education and analysis platform that helps both novice and experienced investors research and evaluate stocks. Based on the search results, the key things Stock Unlock does are:
  • Provides detailed fundamental analysis and data on stocks, including financial metrics, analyst data, insider trades, and ownership information. This allows users to thoroughly research and evaluate companies before investing.1234
  • Offers investment education and guidance to help users, especially beginners, learn how to analyze stocks and make informed investment decisions. The platform has over 200 pages of custom educational content.3
  • Allows users to easily compare the fundamentals of multiple stocks side-by-side, which helps identify good investment opportunities and avoid poor ones.23
  • Offers portfolio tracking and monitoring tools to help users manage their investments, including features to visualize and analyze dividend income and returns over time.4
In summary, Stock Unlock aims to empower both novice and experienced investors by providing comprehensive stock research, analysis, and educational resources all in one platform, streamlining the investment decision-making process.1234

Create a portfolio and backtest your creation

Recently I joined the Facebook group Canadian Dividend Investing. Someone expressed interest in the Frugal Dividend Portfolio created by Norman Rothery. The question piqued my interest and I turned to the Ai search engine Perplexity. It returned the following:

There is a way to create and back-test a portfolio of Canadian stocks and ETFs. How? Use the Portfolio Visualizer tool. It lets you construct one or more portfolios based on selected mutual funds, ETFs, and stocks. You can then analyze and backtest the portfolio returns, risk characteristics, style exposures, and drawdowns over a specified time period. To create and back-test a portfolio of Canadian stocks and ETFs using the Portfolio Visualizer:

  1. Go to the Portfolio Visualizer website at https://www.portfoliovisualizer.com/backtest-portfolio
  2. In the "Portfolio Allocation" section, you can add the Canadian stocks and ETFs you want to include in your portfolio. You can search for and select the specific funds you want to use.
  3. Set the time period you want to backtest, such as the past 3 years.
  4. The tool will then analyze the historical performance of your portfolio and provide detailed metrics like returns, risk, and diversification.

This allows you to see how your selected mix of Canadian investments would have performed over the past 3 years, which can help you evaluate and refine your portfolio before investing real money. The Portfolio Visualizer is a useful tool for building and testing investment portfolios.

There are three versions of the Portfolio Visualizer and one is free. As is to be expected, it does not deliver all the bells and whistles of the other two but it is amazingly good. It is certainly worth a look. I wonder how long the free version will remain available online.

Wednesday, April 17, 2024

Sometimes investing is gambling and its fun!

B2 Gold (BTO) is a Canadian gold mining company with its offices in Vancouver, British Columbia, and it's a penny stock on the TSX. Recently, I read that B2 Gold is opening a mine in Nunavut early in the coming year. With my interest piqued, I did a little research.

On one hand many of the target values for the stock are being re-evaluated downward. In WebBroker, I clicked on News and read "RBC Cuts Price Target on B2Gold to $3.50 From $4." This was but one of the bulletins announcing a lowered target.

On the other hand, when I clicked on Analysts I discovered that B2 Gold in rated a Strong Buy with a price target of $5.66. That is down from the $6 plus target that B2 Gold held recently but it is still well up from my $3.60 entry point. A check with Morningstar showed that Morningstar saw B2 Gold as fairly valued. No clear cut direction here as to whether one should buy BTO.

Finally, as a dividend investor, the 5.9% dividend was a magnet or would have been if it were not for the published payout ratio of 1,981.94%! That is just a crazy number. How is that even possible?

Did I buy? Yes. Why? Just for the fun of it. For the excitement. Yes, the money invested in BTO might disappear but it also might return a very nice profit. This is a "do you feel lucky" moment and I felt lucky. So far, I've been lucky.

I bought a few thousand shares at $3.64, kept them long enough to collect a nice dividend, and then sold all for about $3.85. Including the dividend I was now up more than $700. I placed an offer to buy but a low ball offer. Yesterday, I picked up all the shares I sold and then some at $3.60 a share. Today BTO is selling for $3.77. 

The game is not over but I may well make more than a thousand dollars gambling on B2 Gold.

Friday, April 5, 2024

A Nine ETF with Cash Retirement Porfolio

Over the past few nights I have been working on the ultimate ETF retirement portfolio. The portfolio must produce something close to the present income from my present retirement portfolio, a portfolio containing mostly stocks with a smidgen of ETFs.

I like to think of my portfolio as fairly solid. Not too volatile. But it is not true. It has lost as much as 20% of its value in long, deep bear markets.What has not been volatile has been the income. With investments like Emera, Fortis, Embridge, Bank of Montreal and Telus and many more, my dividend income very rarely suffers any shrinkage.

It is a very tough order to ask an ETF portfolio to perform as well as a carefully constructed portfolio of top-of-the-line dividend paying stocks, but I think it can be done. Or maybe I should say that I hope it can be done. ETFs are self-balancing. I would love to free myself of the chore, the responsibility, of keeping my retirement income portfolio running.

Today, I created a nine ETFs portfolio with ten percent of its value in cash. If I have calculated correctly it will produce the same yield as my present portfolio. To boost the yield, I included a number of Bank of Montreal created options-boosted ETFs. Options will boost income but will also put a ceiling on capital gains. A downside to using options. The flip side is that options will reduce losses. An upside to using options.

My Nine ETF Retirement Income Portfolio was created with $1,110,000. A full ten percent was kept in cash. Deposit this in a money market fund like TDB8150 today and reap a yield of 4.55% until at least June I believe. At the end of its first day, it had gained $2,688.49. A good start.


 

My Nine ETF Retirement Income Portfolio should yield something approaching five percent and be resistant to falling quickly in bull and bear markets thanks to the generous use of options-enhanced ETFs.

It should show fair capital gains as it contains some exposure to the U.S. market. A full ten percent exposure by way of XSP from iShares. The international exposure should also show fair capital gains thanks to the inclusion of Vanguard VIDY.

At the first of next month, and every month thereafter, I will withdraw $4,200 to live just as I would if this were a real retirement portfolio. Come January, I will make an inkind withdrawal of enough stock to meet the government demands relating to annual RIF withdrawals. The stock will be transferred to an imaginary TFSA opened for the sole purpose of accepting the annual RIF withdrawals.  

You may well wonder at the inclusion of ZUT and RIT in this portfolio. I drilled down into the investments contained in the ETF portfolio leaders. I felt my portfolio needed more exposure to utilities and to real estate.

  • XEI    10%
  • CDZ    17.5%
  • RIT     7%
  • ZUT    5%
  • ZWC    20%
  • XSP    10%  This entry has been corrected. Originally, there was a typo. Oops!
  • ZWH    10%
  • VIDY    5%
  • ZWG    5%
  • Cash    10%

It doesn't look like it but these percentages were worked out using a spreadsheet. The only clues are the percentages devoted to CDZ and RIT.

If this portfolio delivers, especially if it delivers when compared to my present porfolio, I may well slowly sell my stocks and embrace my Nine ETFs Retirement Income Portfolio.

Stay tuned.

A month has gone by. It is now early May and my portfolio is down. I withdrew my first monthly payment of $3,666.66. 

If this were real, I would not be celebrating but I would not be too concerned either. Come back in a month and we will see how we are doing then.


Putting my money where my mouth is -- for real!

I did it. I added to my Emera position. I bought 100 shares of EMA. This will be a core holding. I do not intend to sell this for some time. I will hold it and enjoy a 6.07% yield on my original investment.

Emera is one of the biggest utility companies in Canada but it has extensive holdings in the United States -- especially in Florida. As a utility, it is said to have a stabilizing effect on one's portfolio. Its price should not fluctuate as much as the average stock.

Its dividend of $2.87 is not only to be trusted, it has a DGR (dividend growth rate) of 11.66% over the past three years. To ease dividend reduction concerns even more, the payout ratio is only 66.13%.

I am very happy with my purchase.

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Emera is still lingering in the depths of bear market hole. Today it is selling for even less than what I recently paid. It is at $46.41 as I write this. That is a yield of 6.2%. As a buy and hold stock, Emera is a keeper and at this price it is, in my estimation, a strong buy. -- April 18, 2024
 

Monday, April 1, 2024

Putting my imaginary money where my mouth is.

I honestly believe Telus (T) is an amazing buy today. If I didn't have so much invested in Telus already, I would be buying. Unfortunately, I put all my available cash into Telus when it was some dollars more expensive. I have lost thousands in real, hard cash.

If I could, I would put at least ten thousand into Telus today but I can't. Since I cannot put real money into Telus, I have opened a Portfolio Manager account with $10,000 in imaginary money.

That ten thousand has an unrealized gain of $84.01 already.

Each Monday, I am going to check my Telus "purchase" and post the results. 

I am not alone in my faith in Telus but I did catch a chap on BNN this morning who was very dubious of a Telus recovery and warned viewers to hold onto their cash. Don't be tempted by the Telus dividend was his position.

By the way, I may be out thousands but as long as Telus doesn't reduce its dividend, I will be reaping a nice reward for my ownership. There is a bright light at the end of this dark tunnel. By this time next year, I might be nicely out of the red and well into the black. Why today alone, I pocketed almost $2,150 in dividends. That is almost $8600 annually,

Portfolio Manager - April 1, 2024 - gain of $84.01 on Telus purchase made this morning,

 

It is Friday, April 5th and the market has closed. My imaginary Telus stock is up yet again. Still, this could be a nail-biter in the short term

Sunday, March 31, 2024

Emera: a good addition to a retirement portfolio

Emera is down. It is not scrapping bottom; it could fall farther but it is still down a substantial amount. It is selling for $47.67 and yielding 6.02%. The payout ratio is a little high at 77.61% but that is still not worrisome. The Dividend Growth Rate is solid, consistent and instills confidence. The DGR hit 11.66% calculated over the past three years. Over the past decade, the DGR drops a little to 9.38%.

My goal is to have 15% of my retirement portfolio tucked away in the utilities sector. Today I am not near my goal; I have only 10% in utilities today. This might be an excellent time to add to my Emera holdings. If you are an income investor and do not have any Emera, this could be a good time to add EMA to your holdings.

By the way, I just checked the Morningstar Core Holdings recommendations and the Morningstar Income Portfolio, both Canadian. Emera is on both lists. I see this as a solid vote of confidence. In writing this, I have piqued my own interest.

The Internet is an amazing source of investment advice.

The Internet is an amazing source of investment advice. Surf the Web and learn. It is quick. It is easy. And it can be wrong. The big thing to be, along with curious, is discerning. I asked Perplexity, an Ai program I really like, where to get advice on how to be a discerning investor. Its answer: follow the advice from Investopedia.com.

The following are five tips from Investopedia on how to be discerning when doing financial research.

  • Verify the credibility and qualifications of the source providing investment advice. Look for reputable, established websites and avoid anonymous or unverified sources.

  • Scrutinizing claims. Do your own research to validate any investment recommendations or strategies. Don't blindly trust what you read online.

  • Understand the risks and limitations of any investment product or strategy before committing your money. For instance, Investopedia explains complex financial concepts in easy-to-understand terms.

  • Recognize the difference between investing and speculating. Investopedia emphasizes the importance of a long-term, diversified approach over get-rich-quick schemes.

  • Develop critical thinking skills to identify potential biases, conflicts of interest, or misleading information in online investment advice.

My financial blog is an anonymous, unverified source. I realize this and so I take pains to apply the four other rules listed above and you should too.

For instance, I like REITs as a retirement investment. But REITs were yesterday's darling. Not today's. I have wisely or unwisely kept the faith. My goal is to have eight percent of my retirement portfolio in REITs. I actually have just a little more than seven percent.

I used to invest in individual REITs. No more. Instead, I have two ETFs: ZRE and RIT. ZRE is the BMO Equal Weight REITs Index ETF. It closed Friday at $20.70, yielding 5.217%. RIT is the CI Canadian REIT ETF which closed Friday at $16.15, yielding 5.015%. I may be down a little more than $7000.

On the plus side, I earn about $3500 annually from my REITs. As I have owned REITs for more than a decade, I feel confident that on the whole I am in the black. As my REITs are all held within two ETFs, I think of them as being self-balanced. ZRE follows an index approach while RIT is actually managed. Management costs money and for this reason the RIT MER is higher than the ZRE MER.

Why do I pay the higher MER? Well, the RIT holdings are quite different than those of ZRE. I like diversity. Also, RIT holds some U.S. REITs. I like that as well. And, when it comes to capital gains, RIT often bests ZRE. ZRE is the purple line in the one year graph above which I downloaded from the TSX website.

Even though it is written from an American perspective, the following linked article is quite good: How to invest in REITs. For a Canadian viewpoint, click this link: Why we invest in REITs - 5 Best Canadian REITs for 2024. This is from the TAWCAN blog. An excellent blog by a very wise Taiwanese Canadian.

Saturday, March 30, 2024

Dividends can ease bear market pain.

I thought the Telus price would climb, and climb very quickly. It didn't. It wilted, and its price crashed very quickly. I am out thousands. Oops! I am in the green on my original Telus investment purchased years ago but I am down big time on the purchase made some months ago.

Come Monday I will collect another dividend. I should see a nice, well into the four figures, dividend. It is the second big payout I have enjoyed thanks to Telus. When I have collected four of these payments, I will break even, assuming the Telus price does not keep collapsing.

Telus may reduce its dividend. If it does, I will still be back in the black on my total Telus exposure in what is a very short time to a buy and hold investor like me. I'm thinking of a time frame like a year or so.

I continue to bet on a Telus recovery. When it finally recovers, whenever that might be, it will flip my frown to a grin and my Telus holdings will go from in the red to in the green.While I wait for what I see as an inevitable turnaround, the constant flow of dividend dollars will pay the bills, keeping the wolf from the door. If I don't sell, I don't realize my losses. When it comes to the dividends, I realize my profits every three months.

If I had some free cash, I'd buy a little more Telus. I'm a glutton for something. I hope it's not punishment. 😄

Thursday, March 28, 2024

Telus just keep getting better!

Telus just keeps getting better? Really? Telus is selling for $21.765 at this moment. It is so far into the bear market zone, all hope for a quick recovery is hibernating. Telus is down and may stay down for some time. With its payout ratio now at 261%, Telus may suffer the unthinkable: a dividend reduction. How could it be getting better?

Let's look at the dividend first. It is yielding almost 7% today. Buy Telus at today's price, a price that has some of the fear of a possible dividend cut already factored in, and even if the dividend gets reduced you will probably enjoy a good yield. You will be paid well to wait for a recovery.

Telus is outperforming its main telecom competitors, BCE and Rogers. Of the three, Telus had the best telecom revenue and EBITDA growth to report at the end of the last quarter in 2023. Telus's strength may be in its good management. For instance, Telus has replaced most of its legacy copper network with fiber. It started early and it is finishing early. There's a lot of good news behind the scenes, and not that far behind, when you begin reading the financial reports on Telus.

So, am I buying more Telus? Sadly, no. I do not have the free cash to tie up in Telus. Having admitted this, I will also admit to why I am so low in cash: Telus. Yes, I bought Telus when I thought it had lost as much as it would. It seemed to be on the road to recovery. It wasn't. I have lost thousands.  And yet, I smile.

Come April 1, I will reap my reward for holding Telus; I will pocket a dividend of $0.376 for every Telus share I own and I own a lot. Too much. But, as a retiree, my Telus stock is paying the bills. I look forward to holding Telus for a year or two or even longer and paying oodles of bills with the yield whether it gets cut or not. 

When Telus finally recovers, I will take my profits and run, run to the nearest good looking investment opportunity available at that time. There are always places to stash one's money even if its just a money market fund.

Wednesday, March 20, 2024

Five ETF Portfolio

Recently, I read a post detailing a Canadian income portfolio created with only five ETFs. I wondered how I would approach this problem. Here is my answer.

  • First, one must have a good whack of U.S. stocks. I would put 20% of my funds in ZSP (ZSP - BMO S&P 500 Index ETF) The yield is low (1.21%) but so be it. I can live with that to benefit from a fair amount of exposure to the U.S. market.
  • To round out my non-Canadian holdings, I would put 7.5% of my money into VIDY (Vanguard FTSE Developed ex North America High Dividend Yield Index ETF.) The dividend is about 3.66% today.
  • Now, for a decent exposure to Canadian stock I would put 57.5% into XEI. (iShares S&P/TSX Composite High Dividend Index ETF.) This ETF is yielding in the 5.2% range at this moment.
  • Next, I'd invest 10% in CDZ (iShares S&P/TSX Canadian Dividend Aristocrats Index ETF.) This yield about 3.9%.
  • And I would finish by putting 5% in FCCL. (Fidelity Canadian Low Volatility ETF.) Low volatility and a small dividend at about 2.55%.

I created a portfolio similar to the above but with about 5% of the portfolio kept as cash in TDB8150 where it earns 4.55% daily interest. When the Bank of Canada lowers its rate, this money market account rate will be cut as well. I figure we are good until at least June. 

This five ETF portfolio plus its cash component would yield about 4.12% today. This is not bad but it's far short of what my true retirement portfolio is yielding. The question is will it deliver better growth?

Now, how would you handle this problem. Enter your answer in Portfolio Manager in TD WebBroker and then track your portfolio for a year or two. See how your ideas play out in real time.

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Note: This post has been updated a few times as I learned more about suitable ETFs. It is too early to say too much about the success of this portfolio in the long run but so far it has outperformed my own portfolio which holds more than 20 investments. Stay tuned.

I realize there are quite a few overlapping investments to discover if one drills down into the holdings in the ETFs based on the Canadian market. I don't care. I didn't claim be an expert but a duffer. That said, it's Good Friday and I my Five ETF portfolio is up $14,611.58. Nice.

Wednesday, March 6, 2024

Bell, the telecom giant, is it a buy?

BCE is one of my core holdings but it has been on a race to the bottom, as of late. In fact, all the telecoms are dropping like proverbial stones. When BCE dipped below $49 recently, I should have added to my holding and averaged down. Maybe I will do it tomorrow as it closed today at $49.13. The Morningstar Analyst Report gives the stock a four star rating and yet many analysts I checked feel BMO is a hold. It is possible BCE is going to linger at the bottom for awhile longer. Many analysts seem to think so.

The yield today is 8.12% with a payout ratio hitting 117.19%. This payout ratio, found using WebBroker, is quite high but the number posted by Digrin is even higher -- an unbelievable 175%. Something is wrong here. These numbers are taking us into "Do you feel lucky, punk?" territory.

BMO hasn't reduced a dividend payment in years but past performance yah-da, yah-da, yah-da means don't believe such a move is off the table. DRG (dividend growth rate) is O.K. but not exciting. To put a dividend you believe you can trust into a retirement portfolio, a dividend yielding 8.12%, I am tempted to act and buy a little. BCE seems to present a buying opportunity, a too-good-to-be-true buying opportunity. So, do you, do we, feel lucky?

Bank of Montreal (BMO): Buy

In the interest of full disclosure, I own Bank of Montreal and have for many years. A damn fine stock. When it dipped well below $120 recently, I added to my holdings. It has regained some of its value but it is still a buy today. The Morningstar Analyst Report gives the stock a four star rating and most analysts I checked agree BMO is a buy.

The yield today is 4.84% with a payout ratio of only 83.31%. This payout ratio is quite high for a Canadian bank. A number closer to 45% is what I expected.  For instance, the Royal Bank (RY) is 50%.

BMO hasn't missed a dividend payment in more than 30 years. Its DRG (dividend growth rate) for the past three years is 10.71% and for the past twenty years 11.85%. With numbers like this, I see a core holding for a retiree: a dividend you can trust and it increases regularly.

If I didn't hold any BMO, I'd buy a little at this price but I'd keep some powder dry for other opportunities. With patience one can add to the BMO position when the stock is rated a very strong buy. You must stay alert though, it does not stay in the basement for long and that is a good quality in a stock one plans on owning for a very long time.

Algoma Central Corporation (ALC): Buy

I do not own Algoma Central Corp. (ALC) but at some point in the future I will. Why? Good company, well run with an excellent history when it comes to paying dividends. Today the yield is 5.1% with a payout ratio of only 32.71%. ALC has chalked up 28 dividend paying years and its DRG for the past three years is 30%

Also, ALC has a good moat. It is the only stock in the TSX Marine Shipping sector. If you like diversity, adding a little ALC today looks like a good move.

Why am I holding back? The stock is fairly valued today. I like a bargain. I can afford to wait for a more appealing entry point. When it appears, I'm in.

Wednesday, February 28, 2024

More advice for a retiring friend and nephew

One has to build a solid, dividend-paying portfolio if one is to have a good trusted flow of income in retirement. A stock to consider is Emera (EMA).

First, it is selling in bear market territory. It could go lower and it might but it is well off its recent highs with a drop of more than 20%. 



 

 

At a price of $46.93, EMA is yielding 6.12%. Impressive. Morningstar has Emera on its Canadian Income Pick List for good reason and recently put Emera on the Morningstar Canadian Core List as well.

All retirement portfolios should have some exposure to the utilities sector. Emera is an excellent utility. If one did not have any cash in utilities, EMA today presents an investment opportunity.

The utilities sector is considered a defensive play as people need electricity regardless of economic conditions. With stable earnings and consistent dividends, utilities are less sensitive to market fluctuations. During recessions, defensive sectors like utilities tend to outperform the broader market. But, this does not mean the sector will not lose money in a downturn. Utilities can, and do, take a dive like any other investment.

An investor might allocate 4% of their retirement portfolio to Emera, investing half of that amount today and, if the price retreats, investing the other half.

Another good utility is Fortis (FTS). Fortis is down today but nowhere near as much as Emera. Fortis is correcting. It is off its recent high by about 15%. Selling at $52.49, it is yielding 4.5% today. Again, buying 2% today and 2% later seems like a fair approach.

Utilities are known to increase their dividends regularly. The dividend growth rate (DGR) for Emera is 11.66% over the past three years and 9.38% over the past decade. According to Investopedia, the DGR is the annualized percentage rate of growth of a dividend over a set number of years.

Aiming to invest 10% of a retirement portfolio in utilities is not unreasonable. A portfolio of $400,000 would have $40,000 distributed among a number of Canadian utilities. For instance, if one invested in Canadian Utilities, Emera and Fortis, (2-4-4%), this would generate about $2175 annually.

In the interest of full discloser, I have 3.45% of my portfolio in Emera. I am looking to add another 200 shares if and when the stock price falls a bit more. I also own Fortis and I do not own Canadian Utilities at this time. I do own Altagas (ALA). A stock many include in the utilities sector.

Tuesday, February 27, 2024

Advice for a retiring friend and nephew

My job had a very poor pension plan. If I relied on my company pension in retirement, I couldn't pay my bills. But my wife and I live well. How? Dividend investing. Each year we earn as much or more from our stock portfolio than we do from my company pension plus our CPP and OAS payments combined. For this reason, I am a big booster of investing in stocks in retirement.

With any luck, one will be retired for a long time. So, don't be cheap with your time. Put some time aside for research. To get you started, here are a couple of Webinars I believe a retiree should watch. Log-on to WebBroker and click on Learn -- Webinars -- Past Events. Watch: Five Stock Dividend Portfolio and Defensive Dividend Income for Retirement.

(After posting the above, I found Five Stock Dividend Portfolio on YouTube.)

One caveat: five stocks is a bare minimum. It can be done but why? Why buy one Canadian bank when you could buy two or three? Adding diversity while maintaining quality is always a good move.

Last June I decided to test my retirement theories. I created an imaginary retirement portfolio with an initial value of $1 million dollars. It can been seen here: Retirement Portfolio.

Today, that portfolio is worth $999,619.09. In January, I withdrew the minimum amount as an inkind withdrawal. In accordance with RRIF rules, these stocks were transferred to a newly opened TFSA now worth $42,397.06.

To sum up, my imaginary $1 million retirement portfolio is now worth $1,042,016.15. Later today, after making my monthly $3,470 withdrawal, I will have withdrawn a total of $27,076.65 to cover living expenses in retirement. I think I can claim success for my approach at the moment.

A retiree could choose to buy an annuity rather than buy stock. They could, I wouldn't and didn't, but it is done. On the plus side, an annuity locks in annual payments. On the minus side, the locked in annual payments stays the same for the life of the annuity. A locked in payment loses a lot of buying power over the years. I have an annuity-based pension paying $6273.72 annually. To deliver the same buying power today as it did when opened in 2009. it would have to be paying $8790.

How do insurance companies raise the money to make annuity payments? The insurance companies invest in stocks, bonds and cash funds for one thing. I like to think I simply cut out the middleman. Unlike my annuity payment, my portfolio payment has grown with the passing years and thus far my imaginary portfolio is doing the same.