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
 

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

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.