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.

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. 😄

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.

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.

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.