TC Energy Splitting into Two Companies

If you own TC Energy, I do, today was not a good day. TC Energy (TRP) announced it was splitting into two companies by spinning off its liquids pipelines business. When the market opened, the stock took a dive. Markets do not like surprises and this was a surprise, a big surprise.

BNN reports, "Under the proposed transaction, TC Energy shareholders will retain their current ownership in TC Energy’s common shares and receive a pro-rata allocation of common shares in the new liquids pipelines company. The number of common shares in the new company to be distributed to TC Energy shareholders will be determined prior to the closing of the split."

The company had pledged to sell C$5 billion of assets. A goal that was achieved earlier this week with the agreement to sell a 40% stake in two US natural gas pipeline networks for C$5.2 billion in cash. This sounds good but it may fall short of what TC Energy paid for the Columbia systems just seven years ago in 2016.

The Globe and Mail reports, "The good news for TC Energy is that more than 90 per cent of its cash flows come from regulated assets and long-term contracts, so it has reliable revenues ahead." The bad news is that TC Energy can no longer be said to be a buy. TRP is now a hold --  solid hold. 

It will be interesting to see how Morningstar reacts as TC Energy has just recently been upgraded to a core holding in a number of Morningstar-designed portfolios. Mere weeks ago the Core Pick List reported, "For July’s Pick list, our model recommended the addition of TC Energy TRP . . . " The Canadian Income Pick List called TC Energy (TRP) a top performer with total returns of 3.1%.

Stay tuned. TC Energy has flipped into the Hold category: a surprise.

Buying low and holding is often not easy

Recently, I added to my TRP position when TC Energy Corp. stock dipped to $52.50. Today TRP has hit new lows. Right now it is trading at $48.18.

I have lost more than 8% of my investment, at least that is my paper loss. I feel a little guilty. I told folk that TRP was a buy -- and it was. But it does not feel like it was such a great buy at this moment. Ouch!

I can handle the loss. I'd rather not but investing is not without danger. One cannot time the market, as they say. Still, it is impossible not to want to try. I was trying when I bought at $52.50 and I was wrong.

I worry that a close relative, who bought some TRP, will not have the stomach for this loss and will bail out. I hope not. TRP will recover. It may not hit its target in the near future but it will certainly recover its recent 8% or so loss. My spreadsheet calculates that TRP is deep into bear market territory. It is 33.76% off its high of the past year.

What is the published target price of TRP today? Analysts see TRP climbing to $60.69 in the coming year. Maybe I should buy a little more TRP but I won't. I'm afraid of catching the not-so-mythical in this case falling knife.

But, if the TRP price should continue to collapse, I'd be a buyer at $45. With a dividend pushing 8%, TRP is a core holding in my retirement income portfolio. TRP is going to reward patience. Buy and hold is the correct move here, even though holding may prove more difficult that most non investor would think.

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.

TC Energy and Emera Two Stock PIcks on BNN

Click the link and read what Ryan Bushell said about TC Energy (TRP) and Emera (EMA) when he appeared on BNN recently. I rate these two stocks very highly. I have both in my retirement income portfolio. TRP has an amazing dividend and it looks solid while EMA is one of the largest utilities in Canada. It offers a very good dividend along with a very low Beta. Both are fine holdings.

Ryan Bushell's Top Picks

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.

What me worry?

According to Wikipedia Alfred E. Neuman, of Mad Magazine fame, first appeared in late 19th-century advertisements for painless dentistry – the origin of his "What, me worry?" motto. Today an investor could do worse than take Neuman's worry-free attitude to heart. 

When stock prices fall and investing looks bleak, that is often the time to buy. Telus was well down from its high of the past year and all the telecoms as a group were out of favour with investors; I saw an opportunity and bought.

Almost immediately bad news concerning Telus made big news. Telus took an immediate hit. Within a day or two, the Telus stock price had stabilized and was showing signs of recovery. It was time to buy more.

Today my Telus holdings are in the plus column and my dividend income is up in a four digit amount.

Buy some stock with the goal of selling

When I buy a stock, I buy it because I firmly believe it will go up in value. I am always surprised when a purchase falls in value but this is not uncommon. It is impossible to time the market and buy at the ultimate low stock price.

Averaging down: That said, a good idea is to add to one's holdings when a stock you have complete faith in tumbles after being purchased. For instance, I bought some TD bank in the high $80s. It then fell to the low $80s. I bought more. Then it fell to the mid $70s. I should have bought more again. I didn't. It is now off its lows by more than $9. If I had bought another few hundred shares, I could sell today and realize a gain of thousands. That said, nothing is a sure thing and some caution is never all that bad. As it is, I am up a few thousand.

As a buy and hold senior, realizing capital gains is tough but growing one's core investment funds it a big plus. Right now I hold more CIBC, more TD and more Telus than my allocation plan requires. When these stocks are all well into the plus column, I will sell off the extra and put that cash aside for future purchases. In this way I can boost my dividend income.