Telus has been a winner for me

I like Telus. It has been good to me. I held Telus when it split and took that as an opportunity to sell half my Telus holdings.

Recently, Telus has peaked my interest as it, and the rest of the Canadian telecoms, have been emerging from a long downward spiral. 

For instance, Telus dipped to a low of $21.60 in the past year. Sadly, I didn't add to my Telus holdings at the time.

Recently, I noticed it had recovered to $23.90. I took the bait and added almost two thousand shares to my Telus holdings. It has continued to climb since my purchase and today it is at $25.795. I am up $3600.50 on that buy.

Tomorrow is the ex-date for Telus and Monday is the date of record. Will I be reducing my Telus holdings? Yes but not immediately. Morningstar is rating Telus a 5-Star stock and that means it has more room to run. I will hold until Telus has lost at least one star and possibly two.

But, at some point, I will be reducing my holdings. I do not feel comfortable holding more than four or five percent of my retirement portfolio in any one telecom. Four percent is the goal. One must have goals.

Dividend Capturing: a first look at this strategy

Let's start by immediately admitting that the dividend capture strategy when strictly applied does not work. Period. If it did, everyone would be doing it constantly. It doesn't and everyone isn't. With that out of the way, let's see how my kick-at-the-dividend-capture-can played out.

I decided to buy a solid dividend-paying stock a few days prior to the ex-dividend date. Sticking strictly to the rules of the strategy, one buys the stock in question on the day before the stock's ex-date. I prefer buying two days, or a little more, prior to the ex-date.

The goal is to be a shareholder on the ex-date. This guarantees one is a shareholder of record on the record date, which is often the day after the ex-date. At this point, as a shareholder of record, you have captured the dividend. The dividend is yours. Period.

Key terms to understand:

Declaration Date

This is the date a company announces it is paying a dividend. The declaration statement includes details such as the value of dividend, the record date and the payment date.

Ex-Dividend Date (or Ex-Date)

In order to receive the next scheduled dividend, you must own the stock before this date. If the stock is purchased on or after the ex-dividend date, the buyer will NOT receive the upcoming dividend. The day before the ex-date is said to be the last day one can buy a stock and still be eligible for the coming dividend. I have been told buying the stock in question two days before the ex-date adds a margin of safety.

Record Date (or Date of Record)

By the end of the business day on the record date, you must be on the company's books as a shareholder of record to receive the dividend. The record date is usually the first business day after the ex-dividend date.

Payment Date

This is the scheduled date on which a company will pay a declared dividend to shareholders of record.

Recently, I tried this strategy with Telus (T). Why Telus? Well, today Telus is boasting a five star rating from Morningstar. Other sources rate Telus a "Strong Buy". If I cannot sell the Telus stock quickly for a fast profit, I can hold it and not lose sleep. One could do a lot worse than holding Telus. In fact, I am already a holder of Telus.

How I played the dividend capture strategy with my recent Telus purchase:

• Thursday, November 30: I bought 1900 shares of Telus at $23.90 for a total of $45,419.99.
• Friday, December 8, 2023: ex-dividend date. I was a shareholder.
  
• Monday, December 11, 2023: I was a shareholder of record date. Shares were selling for $24.87.
  
• Tuesday, December 12, 2023: Shares selling for $24.65. I could sell for $46,825.01. I'm holding.
• Wed, December 13, 2023: I could have sold 1900 shares of Telus at $24.94 for a total of $47,376.01 and $1956.02 profit thus far.
  
• Tuesday, January 2, 2023: I will collect a $714.40 dividend payment
  

Total profit for this play could have been $2,670.42. The way this really played out is much different. I figured Telus would continue to climb in price. It didn't. I held and Telus dropped below the price I had originally paid. By December 15th, I was in the red. I should have stuck with the original dividend capture strategy. Oh well . . . I will collect a very nice 6% plus dividend while I wait for the stock to recover and it will.

The table below shows the key dates:

Type	Declaration Date	Ex-Dividend Date	Record Date	Payment Date
Date	November 3	December 8 (Friday)	December 11 (Monday)	January 2, 2024
Note	A dividend of .3761 is announced.	One must own Telus shares before this date to be entitled to the dividend.	At the close of business on this date, one must be on the Telus books as a shareholder in order to receive the dividend.	The date the dividend is paid to shareholders.

Time is the secret to successful investing

The Toronto market is down today. It's not as far down as it has been in recent months but it is down. I am not concerned. A lot of the stock that I own today was purchased some two decades ago. Some of these old holds have to be off their highs by 50% or more before I begin to see red.

The gain at the top of the column on the left represents one of these old holds. It has delivered a steady stream of dividends for decades. I have taken out more money in annual dividend payments than I invested in the stock originally. And, as it has gained in value with the passing years, I have more money in it today than I did at its purchase. Stocks like this form a bulwark against an old, seasoned portfolio falling into the red.

The two stocks at the bottom are recent additions to my portfolio. The second from the bottom was added when the stock, a pipeline, got so cheap I could not resist buying it. With a dividend greater than seven percent, this stock is a gem.

The bottom stock is one that I bought just days ago. I am playing with the dividend capture strategy for an upcoming post. My gut feeling is that this strategy doesn't work. If it did, everyone would be doing it and everyone isn't.

The ex-date for this stock is this Friday and last Friday it looked to be a stock on the upswing. And not only was it gaining value but its entire group, in this case telecoms, was in recovery mode. With all the relevant boxes checked, I bought a few hundred shares.

What lessons do I take from the above? Lots of time spent holding a stock that is slowly climbing in value is time well spent. And although it is next to impossible to time the market, being lucky and buying a stock at the right time is a huge bonus. When you manage to time the market, admittedly after the fact, smile and go with the flow. You may have a gem worth holding for years.

Never forget: compounding is your friend. And time is the friend of compounding.

$1 Million Retirement Portfolio Demo as of Dec. 1, 2023

It is December and my crack at designing a retirement portfolio for a retiree with a million dollars in savings has climbed above the million dollar mark. In other words, the portfolio, opened in late June, is now back to the value it had when opened. 

On the bright side, starting in August, I am withdrawing $3,333.33 at the first of each month. December's withdrawal brings the total withdrawn to $16,666.65. No matter the value of the portfolio, I am deducting the full $3,333.33 each month as this amount is covered by dividend income.

Today, the cash balance in the portfolio is $2,355.74. Clearly, I  am in good shape to start the new year. I only need to collect a little less than a thousand dollars in dividends in the coming month to make my January payment. I will check the official inflation rate for 2023 and I will increase the monthly payment by that percentage.

I will also be opening a TFSA to receive the in-kind stock withdrawal I must make come January. My imaginary retiree is 65 and so is his wife. I will be withdrawing in-kind the mandatory 4% of the opening value of the RIF and transferring that stock to the TFSA. To meet my monthly withdrawal demands, I may have to withdraw funds from both the RIF and the TFSA. We will see.

Retirement Porfolio Portfolio At $997,693.50

In late June I posted a retirement portfolio for a Canadian retiree with $1 million to invest. I put all the retirement savings into stock and it immediately took off. I soon had more than $50,000 in unrealized gains. Then the market went into a tailspin. My imaginary portfolio dropped to less than $970,000. Ouch!

Even though the portfolio was losing money, it continued pumping out dividend income. I was able to withdraw $3,333.33 at the first of each month starting in August. At this point I have withdrawn a total of $13,333.32 and the portfolio itself has almost recovered all the value it had lost. 

My retirement portfolio now has a value of $997,693.60. If you want to see the portfolio I posted, please click the following link: My latest crack at a retirement portfolio.

Stay tuned. This portfolio and its management will get interesting come income tax time. There is an interesting wrinkle on the horizon. Hint: I meet the government minimum withdrawal demands with in-kind withdrawals rather than cash.

Retirement Porfolio Has Shrunk to $970,985.

Look above the date at the top left of each of my money blog posts and you will see this link: My latest crack at a "Retirement Portfolio". Click on the link to see a retirement portfolio created at the end of June in 2023. If this were a real, functioning, million dollar retirement portfolio, a total of  $13,333.32 would have already been removed to provide the mythological retiree with a monthly income of $3,333.33. The first payment was made in early August and will be increased annually to meet RIF withdrawal rules.

Note, 30% of each withdrawal is withheld to meet future tax demands. The retiree only sees 70% of the withdrawal for meeting living expenses. Although, one could argue that 100% of the withdrawal goes to living expenses as taxes are certainly a living expense.

Today the million dollar retirement portfolio is worth only $970,985.98. The market is in decline at the moment but the dividend income will continues undiminished. I imagine it will grow a little in 2024. Dividends often increase but cuts are not unknown.

At the age of 65 the government mandates 4% of the a RIF or LIF portfolio must be withdrawn. This mandated percentage jumps to 4.17% in the year one turns 66. It continues to jump each year until one reaches the age of 95. At 95 the withdrawal rate hits 20% and remains there. The goal of the government is clearly to bleed the retirement portfolio dry. For more info on the withdrawal rules, click this link.

If you come back in the new year, you will find that I make my mandated withdrawals in-kind. This is the way I operate in reality and I am going do the same online with this test account. I will transfer stock from my imaginary RIF to an imaginary TFSA. 

The cumulative maximum contribution space in a new 2024 TFSA is $95,000. This means all the dividend income from this year's withdrawal can be protected and not only for this year. Dividends earned in a TFSA are sheltered from the ravages of income tax. It is called a tax free savings account, after all.

Although I will not have to pay tax immediately on the transferred amount, I will have to pay the tax next year. To avoid the future shock of a spring income tax bill, I will withhold 30% from each monthly payment to cover future tax costs.

I often catch the falling knife.

I have often caught the falling knife. The falling knife is a stock which is falling in price and one makes the mistake of buying long before it has hit bottom. Why does someone buy such a stock? The answer is easy: it looked like a great deal when compared to its recent highs.

For instance, a little over a year ago Bank of Montreal was selling for about $155. Then, it started falling. When it got down to about $117, I bought a couple of hundred shares. Recently, it sold for as little as $102.67. Yesterday it closed at $104.53. I am down about $2500 on my recent buy.

Guided by history, I believe BMO stock will revisit its old highs within three years and most likely in far less time than that. I may well be up $8000 in three years and I will have collect approximately $900 in dividends in those three years. I may make approximately 12.9% annually despite having caught a "falling knife."

For another example, let's look at my recent purchase of TC Energy (TRP). I paid $45.89 for my shares. I pulled the trigger early but the stock recovered quickly. The price is now at $47.24. I am up $270. The icing on the cake is the dividend. I have already collected $186.

The lesson I am trying to impart here is buy good companies at good prices and you will do just fine. Don't worry about calling the bottom. That is something that is almost impossible to do.  Don't berate yourself when you buy early. It happens. In the scheme of things, it is not important. If the spread grows grossly large, you can always average down if you still have confidence in the stock.

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By market close Friday, TRP was at $49.92. I was now up $806 in unrealized gains plus $186 in dividends. 

Sometimes, "catching the falling knife" is not the right metaphor. Sometimes, one "dodges the bullet."