Featured Post

My latest crack at a "Retirement Portfolio"

Monday, April 22, 2024

Honest, Dr. Graham Brockley, I am not a "bot".

Recently I found an interesting Facebook page devoted to dividend investing: Canadian Dividend Investing. I'd post a link but because of a complaint, I believe, from Dr. Graham Brockley, of Ladysmith Urgent Care in British Columbia, I have been blocked. Why? I think it's because he thinks I am a "bot".

The good doctor is interested in the Frugal Dividend Portfolio created by Norman Rothery and carried by the Globe and Mail. I'm familiar with this portfolio as TD WebBroker reposts it in its News section. The portfolio is the result of a unique screening process devised by Rothery. I gather Dr. Brockley would like to emulate the Rothery screening system. I cannot say for certain as the doctor shut-down our conversation after accusing me of being a "bot".

I liked the direction the doctor was going. I decides to continue my investigation without him. The first thing we must know is how does Rothery structure his screening process? I turned to Andi. Andi is an Ai powered search engine. Andi told me:

 

Norman Rothery constructs his Frugal Dividend portfolio using a multi-step process that focuses on large, stable dividend-paying stocks trading at low valuations.

The process begins with the 300 largest stocks on the Toronto Stock Exchange (TSX) by market capitalization. It then narrows in on the roughly 200 stocks that pay dividends.

From there, it selects the 50 dividend stocks with the lowest volatility over the prior 260 days.

Finally, it picks the 10 stocks with the lowest positive price-to-earnings (P/E) ratios from those 50 low-volatility dividend payers.

The portfolio is typically re-balanced monthly or quarterly. When re-balanced monthly, it has historically replaced about two stocks per month on average.

Rothery's Frugal Dividend approach aims to build a concentrated portfolio of undervalued, stable dividend stocks to deliver market-beating returns over the long run. However, investors should be prepared for volatility.

 

Has his approach worked? Amazingly well if the Ai search engine Andi is correct. According to Andi backtesting has shown the Frugal Dividend portfolio gained an impressive 17.4% annually from 1995-2022, assuming monthly rebalancing. Even with just annual rebalancing, it returned 16.9% per year on average over that period.

A caveat, be aware that while the portfolio has generated strong long-term returns, it can still decline significantly during market downturns. For example, it fell 35% in the 2008 financial crisis and 28% during the 2020 COVID-19 crash.

As of March 2023, the Frugal Dividend portfolio had a median dividend yield of 4.4% and median earnings yield of 12.5%. The latest version of the Frugal Dividend Porfolio that I could find is posted below.



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Norman Rothery, PhD, CFA, is the founder of StingyInvestor.com. His ideas on investing are published regularly in the Globe and Mail and reposted by TD WebBroker in their News section. Rothery is a man worth following.

If, like the good doctor who inspired this post, you would like to do your own screening for the the perfect income portfolio, there are a number of screening programs available online. Sadly, many only allow limited access to the screening tool unless a payment, often monthly or annually, is made.

Screens available on the Internet

  • Stock Rover - Best for fundamental investors, offering robust screening and research features to help investors make informed decisions and find undervalued stocks. According to the information I found, Stock Rover offers the following pricing plans:
  • Free Plan: Completely free
  • Essentials Plan: $7.99/month or $79.99/year or $139.99/2 years
  • Premium Plan: $17.99/month or $179.99/year or $319.99/2 years
  • Premium Plus Plan: $27.99/month or $279.99/year or $479.99/2 years

The search results also mention that Research Reports can be bundled with any yearly or 2-year Stock Rover plan for $49.99/year, otherwise they cost $99.99/year.

  • Trade Ideas - Best for technical traders, with its AI-powered stock screener "Holly" that uses machine learning to provide stock recommendations. 10 day test period. According to the search results, the cost of using Trade Ideas depends on the subscription plan: Trade Ideas offers both free and paid subscription plans. 
  • The free plan provides access to basic stock scanning and screening tools. 
  • The paid Premium subscription plan offers more advanced features like backtesting, auto-trading, and access to the AI trading assistant "Holly". 
  • The specific pricing details for the Trade Ideas Premium subscription are not provided in the search results. However, it is mentioned that the Premium plan is designed for active, short-term traders and provides access to institutional-grade trading tool.
  • Finviz - Best free stock screener, with a user-friendly interface and the ability to filter stocks based on various fundamental and technical criteria.  
  • StocksToTrade - Best overall low float stock screener, with a highly customizable desktop app and an algorithm-based chart analysis tool called Oracle. 
  • StockFetcher - Best customizable low float stock screener, allowing users to code their own complex filters using a coding-like language.
  • ChartMill - Most versatile stock screener for low float stocks, offering a combination of technical and fundamental parameters. 
  • Yahoo Finance - Offers a free and advanced stock screener with a wide variety of filters, including the ability to screen for sustainable ESG stocks. 
  • TradingView - Has a user-friendly stock screener interface, and also offers forex and cryptocurrency screeners.
  • StockFetcher - Supports over 125 indicators to build unique stock filters, though the interface may be overwhelming for beginners.
  • Fidelity - Brokers often provide their own free stock screeners, which may be a good option if you already have an account with them.

Friday, April 19, 2024

Stock Unlock: worth a look

Here is what Perplexity had to say about Stock Unlock.

Stock Unlock is an investment education and analysis platform that helps both novice and experienced investors research and evaluate stocks. Based on the search results, the key things Stock Unlock does are:
  • Provides detailed fundamental analysis and data on stocks, including financial metrics, analyst data, insider trades, and ownership information. This allows users to thoroughly research and evaluate companies before investing.1234
  • Offers investment education and guidance to help users, especially beginners, learn how to analyze stocks and make informed investment decisions. The platform has over 200 pages of custom educational content.3
  • Allows users to easily compare the fundamentals of multiple stocks side-by-side, which helps identify good investment opportunities and avoid poor ones.23
  • Offers portfolio tracking and monitoring tools to help users manage their investments, including features to visualize and analyze dividend income and returns over time.4
In summary, Stock Unlock aims to empower both novice and experienced investors by providing comprehensive stock research, analysis, and educational resources all in one platform, streamlining the investment decision-making process.1234

Create a portfolio and backtest your creation

Recently I joined the Facebook group Canadian Dividend Investing. Someone expressed interest in the Frugal Dividend Portfolio created by Norman Rothery. The question piqued my interest and I turned to the Ai search engine Perplexity. It returned the following:

There is a way to create and back-test a portfolio of Canadian stocks and ETFs. How? Use the Portfolio Visualizer tool. It lets you construct one or more portfolios based on selected mutual funds, ETFs, and stocks. You can then analyze and backtest the portfolio returns, risk characteristics, style exposures, and drawdowns over a specified time period. To create and back-test a portfolio of Canadian stocks and ETFs using the Portfolio Visualizer:

  1. Go to the Portfolio Visualizer website at https://www.portfoliovisualizer.com/backtest-portfolio
  2. In the "Portfolio Allocation" section, you can add the Canadian stocks and ETFs you want to include in your portfolio. You can search for and select the specific funds you want to use.
  3. Set the time period you want to backtest, such as the past 3 years.
  4. The tool will then analyze the historical performance of your portfolio and provide detailed metrics like returns, risk, and diversification.

This allows you to see how your selected mix of Canadian investments would have performed over the past 3 years, which can help you evaluate and refine your portfolio before investing real money. The Portfolio Visualizer is a useful tool for building and testing investment portfolios.

There are three versions of the Portfolio Visualizer and one is free. As is to be expected, it does not deliver all the bells and whistles of the other two but it is amazingly good. It is certainly worth a look. I wonder how long the free version will remain available online.

Wednesday, April 17, 2024

Sometimes investing is gambling and its fun!

B2 Gold (BTO) is a Canadian gold mining company with its offices in Vancouver, British Columbia, and it's a penny stock on the TSX. Recently, I read that B2 Gold is opening a mine in Nunavut early in the coming year. With my interest piqued, I did a little research.

On one hand many of the target values for the stock are being re-evaluated downward. In WebBroker, I clicked on News and read "RBC Cuts Price Target on B2Gold to $3.50 From $4." This was but one of the bulletins announcing a lowered target.

On the other hand, when I clicked on Analysts I discovered that B2 Gold in rated a Strong Buy with a price target of $5.66. That is down from the $6 plus target that B2 Gold held recently but it is still well up from my $3.60 entry point. A check with Morningstar showed that Morningstar saw B2 Gold as fairly valued. No clear cut direction here as to whether one should buy BTO.

Finally, as a dividend investor, the 5.9% dividend was a magnet or would have been if it were not for the published payout ratio of 1,981.94%! That is just a crazy number. How is that even possible?

Did I buy? Yes. Why? Just for the fun of it. For the excitement. Yes, the money invested in BTO might disappear but it also might return a very nice profit. This is a "do you feel lucky" moment and I felt lucky. So far, I've been lucky.

I bought a few thousand shares at $3.64, kept them long enough to collect a nice dividend, and then sold all for about $3.85. Including the dividend I was now up more than $700. I placed an offer to buy but a low ball offer. Yesterday, I picked up all the shares I sold and then some at $3.60 a share. Today BTO is selling for $3.77. 

The game is not over but I may well make more than a thousand dollars gambling on B2 Gold.

Friday, April 5, 2024

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.

____________________________________________________________

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
 

Monday, April 1, 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