BNS is in bear market territory

 

A lot of folk are bad mouthing the Canadian big banks at the moment. Why? Mortgage loans. And, in the case of the TD Bank, there is an active lawsuit hanging over it in the States. The result, the stock prices of the big six are falling. 

That said: the solvency of the banks is not in question. It may soon be a time to buy. For some, that time might even be right now. The Bank of Nova Scotia is yielding 6.5% today and the dividend is safe. For long term investors who like, or even need, dividend income, this is a very good buy and hold candidate.

Me, I have enough BNS to tide me over. At $65.28, my interest is peaked but I am not buying. If BNS should drop a little more than two more dollars, it will be selling at its lowest price in a year. Below $63, it would be hard to argue that BNS is not a buy. 

If a retiree could put $10,000 into BNS at $62.99, it should yield almost $675 annually indefinitely with steady increases to the dividend payout quite likely if the past is any indication.

Should a retiree portfolio hold ETFs or stocks?

I own just three ETFs. Two give me exposure to REITs and one gives me exposure to the U.S. stock market. Otherwise, my entire retirement portfolio is composed of individual stocks. My gut tells me that ETFs are good but I cannot get past the fact that the ETFs own stocks that I would not give a second look. 

For instance, I like Enbridge. If I am buying stock, I can invest 6% or 7% of my portfolio in Enbridge. If I buy XEI, I am still getting Enbridge but not as much as would like. XEI holds about 4.9% of its total value in ENB. Enbridge is yielding about 7.2% today. I am willing to accept the risk of holding the stock in return for this amount of income.

If you would like to know more about my feelings on building a retirement portfolio, click here: https://rockinonmoney.blogspot.com/2023/03/core-holdings-in-retirement-portfolio.html

Over the weekend, out of curiosity, I built an imaginary portfolio using ETFs commonly suggested for this use -- building a retirement portfolio. The ETF portfolio had the exact same value as my own actual portfolio. Today, the first day of the "competition", the ETF portfolio has lost $4000. I have lost about half that amount. But, one day is not enough time for making a meaningful evaluation. Maybe in six months.

The ETFs I used for my imaginary portfolio:

• XTR
• XEI
• XDI
• RIT
• ZWA
• ZWH
  

 

TD WebBroker Tip: Use "Projected Income"

As a retired fellow, I find this often-overlooked-feature quite handy. It delivers an update-to-date report of the expected total dividend income from an investment account.

How does one access this feature? Login to TD WebBroker and click on Projected Income. That's it. Why everyone doesn't do this is beyond me.

Be aware that the projected income does not include interest paid on cash parked in money market funds like TDB8150 which is yielding 4.05% at this time. If a lot of money is saved in such a fund, this can add up to a substantial amount of income.

For retirement portfolio, I'm thinking CIBC (CM) and TD

When sinking money into the market I follow the five-year-rule: only invest money that will not be needed sooner than five years. If you may need it sooner, a money market fund like TDB8150 is a great place to park the money. Today that fund is paying 4.05%. A very nice return for a no-risk investment.

In retirement, I like to spend the dividends and leave the stock untouched. At the moment, one of my buy and hold picks is CIBC, stock exchange symbol CM. This bank stock is selling for $57.70 as of market close Friday. The dividend is $3.40 for a yield of 5.9%.

$30,000 buys 520 shares and pays one an annual dividend of $1768. With many analysts projecting a future value of approximately $70, CIBC offers the chance to make a very nice capital gain -- especially nice if the gain is inside a registered account (RRSP, RRIF, TFSA).

In interests of full disclosure, I hold CIBC in my retirement portfolio and have added to my position recently. Another Canadian bank well worth a second look is Toronto Dominion (TD). It is somewhat beaten up at the moment and thus is offering a better yield that is usually offered. I also bought a little extra TD recently. I like to take my own advice.

Cheers and good investing.